On Thursday, 6 October 2022, the EU introduced further economic and individual sanctions against Russia in response to the escalating war against Ukraine and the purported annexation of Ukraine’s Donetsk, Luhansk, Zaporizhzhia and Kherson regions (referred to as the “eighth EU sanctions package”).
This includes legislative mechanisms for the G7’s proposed price cap restrictions on Russian oil (the “Price Cap”), although how these mechanisms will operate remains subject to agreement of the Price Cap. This follows U.S. guidance from early September on how the Price Cap is expected to operate, discussed below.
On Friday 7 October 2022, the EU also published further updates to its somewhat troublesome FAQs dealing with restrictions on certain coal, fertilizer and other Russian-origin goods, discussed in our previous client alert of 20 September 2022.
Eighth EU sanctions package
The wide range of measures introduced as part of the EU’s eighth sanctions package includes changes to Council Regulations (EU) 833/2014, 269/2014 and 2022/263, which deal with the sectoral sanctions against Russia, asset-freeze restrictions against certain Russian individuals and measures against the Russian-occupied invaded regions, respectively. We summarise these below:
A. Restrictions on Russian-origin goods and goods exported from Russia
Price Cap on crude oil and petroleum products (new Article 3n(4) onwards)
Subject to the EU Council unanimously agreeing a price cap (a “Price Cap Decision”), it shall be prohibited to transport, including through ship-to-ship transfers, to third countries crude oil (with CN code 2710) after 5 December 2022, or petroleum products (with CN code 2709 00) after 5 February 2023.
The prohibition on transportation shall not apply if the price per barrel of the transported product is at or below the Price Cap. Associated insurance, technical assistance, brokering services or financial assistance will also be permitted in relation to Price Cap compliant voyages.
Further, for a period of 90 days after each Price Cap Decision – indicating that the Price Cap may be amended from time to time – the restrictions on transportation will not apply provided that:
- The transportation is based on a cargo purchase contract concluded before the Price Cap Decision.
- The purchase price per barrel did not exceed the Price Cap on the date of conclusion of that contract.
The EU Commission has said it will develop guidance for implementing the Price Cap mechanism, but, similar to the U.S. approach discussed below, it will rely on an attestation process to allow operators in the supply chain to demonstrate that the product was purchased at or below the Price Cap.