The EU’s sixth sanctions package in response to Russia’s war against Ukraine

Introductory remarks

On 03 June 2022, the European Union passed its sixth sanctions package in response to the Russian invasion of Ukraine. This round of sanctions had been especially fiercely debated between member States, with disagreements over the modalities of a (partial) oil embargo holding up implementation for almost one month. Once again, the new measures aim to limit the abilities of the Russian government to finance the war.

With the sixth package, again, Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine, Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (amending acts here and here) and Regulation (EU) No 765/2006 concerning restrictive measures in view of the situation in Belarus and the involvement of Belarus in the Russian aggression against Ukraine (amending acts here and here) are being amended. This extension of the sanctions provides for, inter alia, a partial oil embargo, the “de-SWIFTing” of Sberbank and other three Russian banks as well as the Belarusian Belinvestbank, a ban on insurance and reinsurance of Russian ships by EU companies, a ban on certain services and a broadcasting prohibition for three Russian state-controlled media outlets. Additionally, further individuals and companies are listed as designated person under financial sanctions and the possibilities to apply for derogation are hardened for several Russian and Belarusian companies.

A. Partial oil embargo

The regulation contains a complete import ban on all Russian seaborne crude oil and petroleum products, which covers 90% of the European current oil imports from Russia. The ban is subject to some transition periods in order to allow the EU and its partners to secure alternative supplies and minimise the impact on global supply chains. For seaborne crude oil, spot market transactions and execution of existing contracts will be allowed for full six months after entry into force of the new measures; for petroleum products, the grace period is eight months after entry into force. Member States with a particular pipeline dependency on Russia can continue to receive crude oil until the Council decides otherwise. In particular, a special temporary derogation to import crude oil and petroleum products via maritime transport has been granted to Bulgaria until the end of 2024; while Croatia will be able to authorise until the end of 2023 the import of Russian vacuum gas oil necessary for the functioning of its refinery, Art. 3m and Annex XXV of newly amended Regulation (EU) No 833/2014. Additionally, according to Art. 3n of newly amended Regulation (EU) No 833/2014, the prohibition of assisting services, including insuring and financing, also applies to the transport of Russian crude oil or petroleum products to third countries.

The Council stressed that the general principles of solidarity and regional cooperation will apply in case of possible disruptions to the supply of oil; while the European Commission will monitor closely markets and the security of supply of the Union.

B. Exclusion of Sberbank from SWIFT

Sberbank, Russia’s largest bank, has been removed from SWIFT, together with Credit Bank of Moscow and Joint Stock Company Russian Agricultural Bank, JSC Rosselkhozbank, Art. 5h and newly extended Annex XIV of Regulation (EU) No 833/2014. With regard to Belarusian banks, Belinvestbank has been removed from SWIFT, Art. 1zb and newly extended Annex XV of Regulation (EU) No 765/2006.

C. Service ban

The new provisions contain a prohibition to provide, directly or indirectly, certain business-relevant services, namely accounting, auditing, statutory audit, bookkeeping and tax consulting services, business and management consulting and public relations services to the Russian government and to legal persons and entities established in Russia, Art. 5n of newly amended Regulation (EU) No 833/2014.

The scope of the services forbidden under this article is described further in recital (26) of newly amended Regulation (EU) No 833/2014:

• accounting, auditing, bookkeeping and tax consultancy services cover the recording of commercial transactions for businesses and others; examination services of accounting records and financial statements; business tax planning and consulting; and the preparation of tax documents;
  
  
• business and management consulting and public relations services cover advisory, guidance and operational assistance services provided to businesses for business policy and strategy and the overall planning, structuring and control of an organisation. Management fees, management auditing; market management, human resources, production management and project management consulting; and advisory, guidance and operational services related to improving the image of the clients and their relations with the general public and other institutions are all included.

The prohibition does not apply to the beforementioned services if they are strictly necessary for the right of defence in judicial proceedings and the right to an effective legal remedy (Art. 5n para. 3) or for the exclusive use by entities established in Russia but owned by, or solely or jointly controlled by, a legal person, entity or body incorporated or constituted under the law of a Member State (Art. 5n para. 4). Further, Art. 5n para. 2 foresees a grandfathering clause for the beforementioned services if they are strictly necessary to terminate a contract on the provision of services now forbidden by new Art. 5n para. 1. This grandfathering clause applies to contracts concluded before 4 June 2022; the derogation period ends  05 July 2022.

D. Broadcasting prohibition

The broadcasting activities of another three Russian State outlets (Rossiya RTR/RTR Planeta, Rossiya 24/Russia 24, and TV Centre International) have been suspended because of their role in disseminating propaganda in support of Russian aggression. This covers transmission or distribution by any means, such as cable, satellite, IPTV, Internet service providers, Internet video sharing platforms or applications. The advertising of products or services on sanctioned outlets has also been prohibited; Art. 2f and Annex XV of newly amended Regulation (EU) No 833/2014.

E. Export restrictions

The EU’s sixth sanctions package also includes further export restrictions. The list of advanced technology items banned from export to Russia has been expanded to include additional chemicals that could be used in manufacturing chemical weapons, Art. 2a, 2b and newly expanded Annex VII of Regulation (EU) No 833/2014. The proposed list of additional chemicals sanctioned represents more than 600 million Euro of EU exports to Russia. However, the export of these items remain possible for humanitarian purposes, medical and pharmaceutical purposes and health emergencies.

F. Further amendments

Further to the newly added restrictive measures, the legislator, inter alia, added important derogations from the general transaction prohibitions as set forth in Art. 5aa Regulation (EU) No 833/2014:  not only has the reception of payments due because of contracts concluded before 15 May 2022 been excluded from the provision (Art. 5aa para. 2a of newly amended Regulation (EU) No 833/2014) and, hence, the now expired grandfathering clause been given a clarification with regard to contractual rights, especially their consideration, of entities under EU jurisdiction. Additionally, the legislator has reacted to the difficulties faced by EU companies bound by and willing to end their engagement in Russian joint ventures: transactions, including sales, are not forbidden if and to the extent they are strictly necessary for the wind-down of a joint venture or similar legal arrangement concluded before 16 March 2022. The wind down period ends on 05 September 2022 (Art. 5aa para. 3 lit. d of newly amended Regulation (EU) No 833/2014). Further, transactions related to the provision of electronic communication services, data center services and related operation, maintenance, security and call center services to entities subject to Art. 5aa of Regulation (EU) No 833/2014 are now excluded from the general transaction prohibition (Art. 5aa para. 3 lit. e).

The package adds the UK and the Republic of Korea to the Annex of partner countries that have adopted substantially equivalent export restrictions, Art. 2, 2a, 2d and newly extended Annex VIII of Regulation (EU) No 833/2014.

The Council decided to impose restrictive measures on an additional 65 individuals and 18 entities. Newly amended Annex I of Regulation (EU) No 269/2014 adds the military staff responsible for the atrocities committed in Bucha and Mariupol, leading businesspeople, politicians, propagandists and family members of already listed oligarchs and Kremlin officials to the scope of the asset freeze of Art. 2 of Regulation (EU) No 269/2014. Among the sanctioned entities there are companies supporting the Russian Armed Forces and the Government, including the National Settlement Depository (the largest securities depository of the country). In total there are now more than a thousand individuals and almost a hundred entities that are sanctioned.

Implementation and outlook

This package, that has been coordinated with other international partners, aims to further increase the economic pressure on Russia and to limit its ability to continue its war of aggression against Ukraine in outright violation of fundamental principles of public international law.

In welcoming the adoption of the package, the European Commission expressed its full commitment to assist both Member States and EU operators in order to ensure the implementation of the measures across the Union. It is in fact the Member States’ primary responsibility to ensure the effective and full implementation of the new sanctions. In particular, the new provisions require Member States to lay down criminal penalties for violations of Regulation 269/2014, in case they have not done so yet. Last May, the European Commission also proposed measures to ensure the effective implementation of the EU sanctions by way of supplementary criminal law measures, and to reinforce rules on asset recovery and confiscation.

The tortured process of this sixth sanctions package, in particular with regard to the provisions on the oil ban, underlines the increasing difficulties for the European Institutions to hold together the different needs of the Member States. However, Commission President Ursula von der Leyen and the High Representative of the Union for Foreign Affairs and Security Policy, Josep Borrell, have already declared that nothing is off the table and that a possible ban on Russian gas cannot be excluded. The European institutions are in fact working to end the European dependence on all Russian fossil fuels, including gas, and some European countries (like Poland, Estonia and Latvia) have expressed support for a potential seventh package of sanctions covering also imports of Russian gas into the Union.

 

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