On 18 December, the EU published its 12th sanctions package against Russia, which overall aims to extend the scope of existing export and import restrictions, rather than creating new measures (as in the case of previous packages) while strengthening efforts to limit circumvention.
The package also contains various new measures, including a new listing criterion, a comprehensive import ban on Russian diamonds, various new export and import restrictions, and measures to enforce the oil price, while it imposed individual designations over 140 additional individuals and entities.
The final version of the package is considerably weaker than the Commission’s original proposal, for instance, the sale of older tankers to Russian entities or for usage in Russia, particularly to those that might circumvent the G7’s oil price cap, was not adopted. Instead of the initial requirement for Member States to pre-approve all transfers of funds out of the EU made by Russian-owned entities, now only transactions exceeding a certain value need to be reported. Moreover, the “No-Russia” clause, which was initially applicable to a wide array of dual-use goods, has been revised to focus primarily on weaponry.
It is expected that additional restrictive measures will be imposed by the EU in February, marking the second anniversary of the war in Ukraine.
Key Measures of the 12th Package
I. Trade Measures
The import ban on Russian diamonds (import, purchase, or transfer) applies to diamonds originating in Russia, diamonds exported from Russia, diamonds transiting Russia, and Russian diamonds when processed in third countries.
A direct ban will apply to non-industrial natural and synthetic diamonds and diamond jewellery, as of 1 January 2024, and an indirect import ban on Russian diamonds processed in third countries (cut or polished), including jewellery incorporating diamonds, will be phased in progressively as of 1 March 2024 and be completed by 1 September 2024. A traceability mechanism for the effective enforcement of the measures will also be implemented.
EU exporters will have to contractually prohibit re-exportation to Russia and re-exportation for use in Russia of particularly sensitive goods and technology, including aviation goods, jet fuel, firearms, and goods on the Common High Priority list. When selling, supplying, transferring, or exporting to a third country (except partner countries) EU operators will have to include a clause prohibiting the re-export to Russia.
The transit ban currently applies to dual-use goods and technologies exported from the EU to third countries via the territory of Russia and has been extended to cover all battlefield goods.
29 new entities have been added to the list of those directly supporting Russia’s military and industrial complex. They will be subject to tighter export restrictions concerning dual-use goods and technologies.
The items subject to export restrictions have been expanded to include chemicals, lithium batteries, thermostats, DC motors, servomotors for unmanned aerial vehicles (UA V), machine tools, and machinery parts. Export bans are imposed in the industrial sector as well, including construction-related goods, processed steel, copper, and aluminium goods, lasers, and batteries.
New import bans target raw materials for steel production, processed aluminium products, and other metal goods, including pig iron and spiegeleisen, copper wires, aluminium wires, foil, tubes, and pipes. Liquefied propane (LPG) is also subject to an import ban with a 12-month transitional period.
A prohibition on providing software for the management of enterprises and software for industrial design and manufacture has also been included.
II. Listings & Derogations
More than 140 additional individuals and entities have been sanctioned as part of the 12th package, including firms predominantly active in Russia’s military, defence, and IT industry and other key economic sectors. The sanctions also hit political figures including organizers of the illegal “elections” in Ukraine’s Russia-occupied territories, perpetrators of forced “re-education” of Ukrainian children, and those disseminating disinformation/propaganda supporting Russia’s war against Ukraine.
A new listing criterion targets persons who benefit from the forced transfer of ownership or control over Russian subsidiaries of EU companies.
- Keeping deceased persons listed
The package introduces a possibility to keep deceased persons on the asset freeze list, to prevent the resources being used to finance the war.
- Obligations on asset-tracing
Tighter obligation for Member States to proactively trace assets of listed persons, to prevent and detect instances of breach or circumvention of sanctions.
Exemptions to import restrictions on personal use items, such as personal hygiene items, clothing worn by travellers or contained in their luggage, and cars with a diplomatic vehicle registration plate to enter the EU. Member States can also authorize the entry of cars if they are not for sale and are driven for strictly personal use.
Derogation for the release of frozen funds in cases where a Member State decides, for the public interest, to seize assets from a listed party. Additionally, it allows for the provision of funds and economic resources to the same listed parties to pay compensation, on the condition that this compensation remains frozen.
Derogations for newly listed insurance companies allow compensations for damages to be paid, as well as a derogation for the purchase, import, or transport of agricultural and food products.
Derogation allows the sale of EU companies owned by certain listed individuals or entities.
Derogation from the asset freeze and the restriction on providing resources to allow the sale or utilization of shares in a company based in Russia, in cases where a legal entity from the EU has been forced by the Russian Government to transfer ownership or control of that company.
III. Other Measures
Reporting requirement for transfer of funds outside the EU
A notification requirement has been introduced for the transfer of funds outside the EU by any entity established in the EU that is owned by more than 40% or controlled by Russians or entities established in Russia.
Tighter compliance rules to implement the oil price cap are introduced such as a strengthened information-sharing mechanism allowing better identification of vessels and entities carrying out ship-to-ship transfers and AIS manipulations while transporting Russian crude oil and petroleum products.
A new notification rule is introduced for the sale of tankers to any third country to make more transparent their sale and export, in particular in the case of second-hand carriers that could be used to evade the import ban on Russian crude or petroleum products and the G7 Price Cap.
Member States are now subject to tighter obligations to proactively trace assets of listed persons, and to prevent sanctions circumvention. They are also obliged to designate the national authorities competent to identify and trace those assets.
- Ban on crypto-asset management
A new ban prohibits Russian nationals from owning, controlling, or holding any posts on the governing bodies of the entities providing crypto-asset wallet, account, or custody services to Russian persons and residents.