1. Oil import restrictions
Perhaps the most awaited (and contested) restriction the Member States have agreed to impose is an embargo on the imports of crude oil and refined oil products from Russia. These sanctions come into force with immediate effect – subject to certain wind-down provisions and limited exceptions – and will phase out Russian oil imports in an organized fashion.
The EU will prohibit the import of seaborne crude oil from Russia with a transitory period of six months for existing contracts and spot transactions. The EU will also prohibit the import from Russia of refined petroleum products after a transitory period of eight months for existing contracts and spot transactions. Importantly, there are also reporting obligations as follows:
- For reliance on pre-existing contracts, the underlying transaction must have been reported to the relevant Member States by 24 June 2022; and
- For the “one-off transaction for near-term delivery” (i.e., spot transaction), all aspects of the transaction (including transportation) should be reported to the relevant Member State authority within 10 days of its completion.
There are still many unanswered questions about reporting obligations – such as who is required to report, and to which country do you report if there are multiple EU countries/nationals involved. Those questions still need to be resolved.
Member States which have a specific pipeline dependency on Russia (being landlocked, such as Hungary) will have a temporary exemption and continue to receive crude oil delivered by pipeline until the Council resolves otherwise.
However, after a transitory period of eight months, Member States importing Russian crude and petroleum products via pipeline will not be able to resell these products to other Member States or to third countries.
Because of its geographical location, a temporary derogation until the end of 2024 has been agreed for Bulgaria, which will be able to continue to import crude oil and petroleum products via maritime transport. In addition, Croatia will be able to authorize, until the end of 2023, the import of Russian vacuum gas oil, which is needed for the functioning of its refinery. This will allow both countries time to develop alternative supply routes.
An overall exceptional temporary derogation may be granted by national authorities to the prohibition to import seaborne crude oil if the supply of crude oil by pipeline to a landlocked Member State is interrupted.
2. Oil transport services and insurance
As we understand things, there will be an immediate prohibition on EU operators and entities from providing any new insurance or finance contracts for the transport, in particular through maritime routes, of Russian oil to third countries. The Council has included a wind-down period of six months (until 5 December 2022) for closing out any existing contracts executed before 4 June 2022.
In terms of imports into the Union, the restrictions on insurance will largely mirror the wind-down timelines and specific exceptions as indicated within section 1 above.
EU operators and indeed vessel owners are traditionally significant providers of such services. With the UK government expected to follow this week with its own marine insurance ban on tankers carrying Russian oil, this combination takes most of the international tanker fleet out of the equation where Russia, China, and India will have to use domestically owned or controlled tonnage to move the crude. This will have a serious impact on Russia’s oil industry.
3. Financial and business services measures
Banks
As we reported last week, three additional Russian banks have been removed from SWIFT:
- Russia’s largest bank, Sberbank (though not an asset freeze like the United States’ and the UK’s listing of the bank)
- Credit Bank of Moscow
- Russian Agricultural Bank
One additional Belarussian bank has been removed from SWIFT
Trusts
The restrictive measures on trusts have been updated (Regulation (EU) 833/2014 - article 5m), and applicable exceptions have been added in a revised version of the provision (e.g., for humanitarian purposes, civil society, and the addition of occupational pension schemes and insurance policies for minors or vulnerable adults). Compliance with the prohibition on acting as a trustee, nominee shareholder, secretary, or director for a trust has been extended from 1 May 2022 to 5 July 2022.
Business services
The provision of bookkeeping, audit, tax advice, accounting services, business and management consulting, as well as public relations services to the Russian government and Russian companies is now banned. Such services are only permitted where they are strictly necessary for the termination by 5 July 2022 of existing contracts which themselves were concluded before 4 June 2022, or of ancillary contracts necessary for the execution of such contracts.
By targeting these services, the Russian government and Russian companies will be prevented from benefiting from European services that facilitate their business operations. These new restrictions are largely in line with the restrictions put in place by the United States last month prohibiting services to Russian-owned entities.
4. Broadcasting suspension
The broadcasting activities of three additional Russian State outlets – Rossiya RTR/RTR Planeta, Rossiya 24/Russia 24, and TV Centre International – have been suspended.
They are now prohibited from distributing their content across the EU, in any form – be it on cable, via satellite, on the internet, or via smartphone apps. The EU also has imposed a prohibition to advertising products or services in any content produced or broadcast by these sanctioned Russian outlets.
5. Export restrictions
The list of advanced technology items banned from export to Russia has been extended to include additional chemicals that could be used in the process of manufacturing chemical weapons (already controlled since 2013 for other destinations such as Syria). Specifically:
- Fentanyl and its derivatives, and relevant chemical precursors, which have been used as toxic chemicals (so-called Central Nervous System Acting Chemicals) in the past by Russia, and
- Other synthetic biology manufacturing equipment used for the synthesis of toxins, like peptide synthesisers, as well as nucleic acid assemblers (in order to restrict the export of specific equipment that might be useful for the production of toxic chemicals (continuous flow reactors))
6. Further individuals and entities listed
An additional 65 individuals and 18 entities are now subject to restrictive measures.
The 65 listed individuals include the military staff that led the actions of the units of the Russian army that killed and tortured civilians in Ukraine in Bucha, including Colonel Azatbek Omurbekov, who was nicknamed the ‘Butcher of Bucha’. The list also includes those the EU deems responsible for the siege of the city of Mariupol, including Colonel-General Mikhail Mizintsev, nicknamed the ‘Butcher of Mariupol’, and those who participated in March 2022 in the creation of the so-called Committee of Salvation for Peace and Order– an organ for collaboration with the Russian occupation in Kherson Oblast.
The EU has also imposed sanctions on politicians, propagandists, leading businesspersons, and family members of already sanctioned individuals. The former gymnast and State Duma member Alina Kabaeva is also included in the list, believed to be the long-term girlfriend of President Vladimir Putin. Andrey Melnickenko’s wife, was also targeted in the latest round of sanctions and the details surrounding her listing states that she is the “beneficial owner of Firstline Trust, managed by Linetrust PTC Ltd, a company which represents the ultimate owner of EuroChem Group.”
Of the 18 entities, the bulk of those now listed are companies, contractors, and suppliers deemed to be supporting the Ministry of Defence of the Russian Federation. Another notable listing is the National Settlement Depository, which is Russia’s largest securities depository.
The list of Belarusian entities subject to restrictions has also been significantly widened (from one entity to 25). This mainly relates to entities which could supply dual-use goods to Belarus’s military. The list of Belarusian credit institutions and their Belarusian subsidiaries that are subject to restrictive measures with regard to the provision of specialized financial messaging services has also been expanded.
In-depth 2022-148
