On July 21, 2022, the EU published its “maintenance and alignment” package of sanctions. This latest package seeks to tighten existing sanctions, perfect their implementation, and strengthen their effectiveness. In summary, this latest package has the following effects:
- Extending the list of restricted items which may contribute to Russia’s military and technological enhancement. The newly covered products are included in Annex II of Regulation (EU) 2022/1269 and includes among other things: (i) multidata stream processing technology; (ii) law enforcement/military items; (iii) oil and gas exploration goods and technology; (iv) medical products; (v) chemicals; (vi) nanomaterials such as semiconductor nanomaterials and carbo nanotubes; (vii) concealed object detection equipment; and (viii) robots capable of employing real-time feedback to generate or modify numerical programme data.
- Introducing an import ban on Russian gold (including listed gold products that are processed in a third country, which incorporate Russian gold.)
- Introducing additional procedural obligations such as:
- entities relying on export derogations must notify the relevant Member State authority;
- Member State authorities must inform other Member States and the EU of authorizations that are issued;
- the “cybersecurity and information security” exemption for military and technological goods now requires an authorization before it can be relied on; and
- individuals and entities subject to asset freezes must disclose all assets to the relevant Member State authority and co-operate with any exercise undertaken by the authority to verify such disclosures.
- Allowing for the provision of technical assistance relating to “aviation and space industry” goods insofar as they relate to the establishment of technical standards in the framework for the International Civil Aviation Organization.
- Amending the exemptions to the Article 5aa transaction ban with state-owned entities to ensure they do not impede the purchase of key resources (natural gas, titanium, aluminum) and pharmaceutical, medical and agricultural products. A derogation has also been added in relation to asset freezes against certain banks for transactions which relate to the purchase, import or transport of agricultural or food products.
- Refining certain prohibitions to avoid circumvention. In particular, the port ban has been extended to also cover locks and the “€100,000 deposit limit” restriction has been extended to companies owned (50%+) by Russian nationals.
- Designating additional targets for the purpose of an asset freeze, including Sberbank.
The EU is also exploring further methods to strengthen the enforcement of sanctions, having requested reports from Member States on their sanctions enforcement regimes, leaving the door open to an EU version of OFAC.
Following a proposal from the European Commission, the European Parliament consented (on July 7, 2022) to identifying the violation of EU sanctions as an EU crime. EU crimes currently cover things such as terrorism; human, drugs and arms trafficking; money laundering and organized crime; and sexual exploitation of woman and minors. Adding sanctions violations would enable the EU to establish harmonized minimum rules concerning the interpretation of sanctions and the establishment of consistent penalties. This would mitigate the extent to which certain jurisdictions could be seen as softer on sanctions than others and would be a major development, eliminating the current ‘patchwork’ approach to enforcement across the Union.
Unsurprisingly, the EU has also renewed its sectoral sanctions on Russia (which were due to expire on July 31, 2022) for a further six months.
The UK has also focused its attention on refinement of its existing sanctions regime. Between July 15 and July 21, 2022, the UK published four amendments to its Russia sanctions regime (amending regulations Nos. 11 – 14) as well as updates to its customs regulations. Among other things, these new regulations:
- Expand the trade restrictions against Russia to also cover:
- “G7 dependency and further goods” as listed in Schedule 3E;
- imports of Russian gold;
- imports of Russian oil and fossil fuels (with a staggered implementation up to December 31, 2022); and
- a range of other goods in the maritime navigation and communication, military, defense and security, interception and monitoring, banknotes, and oil refining and energy-related industries (as listed in the Schedules to the Amendment No. 11 Regulation).
- Update the list of products from Russia and Belarus which are subject to additional tariffs.
- Expand the restrictions applying to iron and steel goods to also cover services relating to such goods.
- Implement the much anticipated services ban, covering the provision of accounting services, business and management consulting services, and public relations services to Russia (first announced in May 2022).
- Implement the investment ban (first announced in April 2022). Under the ban, it is prohibited for UK companies to acquire land in Russia or ownership interests in Russian companies, or to establish joint ventures, offices, branches or subsidiaries in Russia.
- Amend existing restrictions on technical assistance for aircraft to exempt necessary technical assistance to temporarily detained aircraft owned by suspected asset frozen individuals.
- The UK has also amended its asset freeze designation criteria and designated new individuals and entities for the purposes of an asset freeze by way of regular Financial Sanction Notices.
Further, from July 5, 2022, the UK’s Belarus sanctions regime was amended to more closely align with the measures in place against Russia. The asset freeze designation criteria under the Belarus regime has been expanded to allow for individuals or entities to be targeted as a means of encouraging the Belarussian government to cease destabilizing Ukraine and supporting Russia’s actions.
The UK is reportedly also considering the possibility of confiscating frozen Russian assets for transfer to Ukraine. British Foreign Secretary Liz Truss said that she is “supportive of the concept” of following the example set by Canada and seizing the assets of Russians in the United Kingdom in order to transfer them to Ukraine provided that they get “the specifics of it right.”