Overview
The European Union and the United Kingdom continue to tighten sanctions against Russia, particularly in the wake of the second anniversary of Russia’s invasion of Ukraine and the sudden death of Russian opposition leader Alexei Navalny. In this Quarterly Sanctions Update, we summarise the most recent and significant amendments introduced, or proposed, by the EU and the UK between December 2023 and April 2024.
The EU amended EU Regulation 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine (Regulation 833/2014) on 18 December 2023 (12th Sanctions Package) and 23 February 2023 (13th Sanctions Package). These amendments include new restrictions on the provision of business services to Russian subsidiaries of “partner companies” and new prohibitions on the importation of pig iron, certain precious metals and diamonds from Russia as well as the exportation of advanced technology to Russia. The amendments also include a new prohibition on the provision of software and a new requirement for EU exporters to ensure that their sales contracts related to certain goods contain “no re-export to Russia” obligation. The 12th and 13th Sanctions Packages were further supplemented by the proposal for a Directive on the definition of criminal offences and penalties for the violation of EU’s restrictive measures, the adoption of which is imminent.
In line with the EU, the UK modified its Russia (Sanctions) (EU Exit) Regulations 2019 (UK Russia Regulations) on 15 and 26 December 2023 and on 1 January and 1 March 2024 (UK Amending Regulations). These measures prohibit the importation of metals and diamonds from Russia as well as the exportation of advanced technology to Russia, and they introduce a new reporting obligation relating to assets of sanctioned persons.
Regulators continue to add additional individuals and entities to the asset freeze restrictions lists of EU Regulation 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (Regulation 269/2014) and the UK Russia Regulations.
In Depth
Asset Freeze
European Union & United Kingdom
- Persons subject to asset freeze: The EU added more than 200 individuals and 172 entities to its list of persons subject to Regulation 269/2014’s asset freeze prohibitions. The UK followed suit, listing more than 56 individuals and entities under the UK Russia Regulations.
Import
European Union & United Kingdom
- Pig iron and other precious metals: The 12th and 13th Sanctions Packages prohibited pig iron and other precious metal imports from Russia (including, among other things, copper or aluminium, listed in Annex XXI to Regulation 833/2014). The UK Amending Regulations also banned the importation of these goods into the UK (listed in Schedules 3B and 3BA to the UK Russia Regulations) to be read in connection with the Trade Licence authorising the acquisition of the above metals on the London Metal Exchange issued on 15 December 2023.
- Diamonds: The 12th Sanctions Package prohibited the importation of diamonds and products incorporating diamonds (listed in Annex XXXVIIIA to Regulation 833/2014) from Russia as well as the provision of the related ancillary services. The new prohibition provides an exemption for diamonds that are for the personal use of natural persons who are traveling to the EU or for their immediate family members. The UK Amending Regulations introduced a similar prohibition regarding the importation of these goods into the UK (listed in Schedule 3GA to the UK Russia Regulations).
Export
European Union & United Kingdom
- Advanced Technology: The 12th and 13th Sanctions Packages prohibited the exportation of additional advanced technology goods to Russia (including, among other things, electrical transformers and inductors, electrical capacitors, lithium batteries, thermostats and DC motors, listed in Annexes VII and XXIII to Regulation 833/2014). The UK Amending Regulations introduced a similar prohibition relating to the exportation of these goods from the UK, including computers, smartphones or other electronics (listed in Schedules 2A, 3C and 3E to the UK Russia Regulations).
Services
European Union
- Business services: The 12th Sanctions Package introduced significant changes to the existing prohibition on the provision of business services (including accounting, auditing, bookkeeping and tax consulting, business and management consulting services) and legal advisory services (Restricted Services) to Russian entities.
- Technical assistance: Providing technical assistance, brokering services and other ancillary services, as well as financing or financial assistance related to the Restricted Services, is now prohibited.
- Partner countries exemption: The Restricted Services can now only be provided for the exclusive use of entities established in Russia owned by, or solely or jointly controlled by, entities established in the EU, European Economic Area (EEA) or any of the “partner countries” (including the UK, US, Australia, Canada, Japan, New Zealand, Norway, Switzerland and South Korea) until 20 June 2024. Following that date, licences must be obtained from the national competent authorities.
On 20 February 2024, the German competent authority (Budensamt für Wirtschaft und Ausfuhrkontrolle) issued General Licence No 42, which authorised the provision of the Restricted Services for the exclusive use of entities established in Russia owned by, or solely or jointly controlled by, entities established in the EU, EEA or any of the “partner countries” from 21 June 2024 until 31 May 2025.
However, on 2 April 2024, the European Commission updated its FAQ on professional services, clarifying that the national competent authorities do not have the power to issue general authorisations covering entire sectors or activities. The Commission also confirmed that operators will need to apply for specific licences in each EU Member State where they provide the Restricted Services. The processing time, information and documents relating to licence applications may vary depending on the EU Member State. For instance, the French competent authority (Direction générale du Trésor) confirmed that operators should use the Téléservice platform to submit the structure chart (in the form of an Excel sheet) indicating the ownership/control of the subsidiary in question and the expected use for each software/service.
- Software: Providing software for the management of enterprises and industrial management and infrastructure, directly or indirectly, to entities established in Russia is prohibited from 19 December 2023, with derogations applying for contracts concluded before 19 December 2023. On 6 February 2024, the European Commission issued an FAQ on software, clarifying the types of software covered under this prohibition.
Anti-Circumvention & Enforcement
European Union
- “No Russia” clause: The 12th Sanctions Package introduced a requirement applicable to exporters of certain goods and technology (including aviation, firearms and common high priority goods such as integrated circuits and semiconductors) to contractually prohibit re-exportation of their goods to and for use in Russia. On 22 February 2024, the European Commission published an FAQ on “no re-export to Russia” clause. The FAQ features a sample clause that can be used by exporters (including penalties for the breach of the clause and due diligence obligations). It is noteworthy that, following the introduction of the price cap on Russian crude oil, this is the next measure of the EU sanctions against Russia with de facto extraterritorial effect.
- Non-Russian companies involved in circumvention: The 12th and 13th Sanctions Packages restricted the exportation of EU dual-use and advanced technology to certain entities (listed in Annex IV to Regulation 833/2014) established in the following countries: Armenia, China (including Hong Kong), India, Iran, Kazakhstan, Serbia, Singapore, Sri Lanka, Syria, United Arab Emirates, Uzbekistan, Thailand and Turkey.
- Reporting on transfers: The 12th Sanctions Package introduced a requirement that affects EU entities with over 40% ownership by Russian entities. These entities must report any fund transfer of funds that they made out of the EU that exceeded EUR 100,000 to their competent authority.
- Criminalisation of sanctions violations: Shortly after the publication of this Quarterly Sanctions Update, the Council of the EU will adopt the Directive that defines what criminal offences and penalties apply for violating the EU restrictive measures. This will require EU Member States to implement the Directive’s provisions into their national criminal laws within one year. The Directive provides the definitions of sanctions violations and circumvention offences, the applicable penalties as well as the test on when the liability for offences could be attributed to corporates. In line with the existing UK regime, the Directive amends the EU anti-money laundering legislation so that transactions involving property derived from sanction violations would constitute money laundering offences.
United Kingdom
- Reporting on frozen assets: The UK Amending Regulations introduced a new reporting requirement applicable to sanctioned persons. The requirement requires such individuals to report their worldwide or UK assets to HM Treasury, as applicable; sanctioned persons must also report any changes to these assets. The UK updated its Russia Guidance to clarify that sanctioned persons must report any change of funds exceeding £10,000.
- First UK sanctions enforcement after Brexit: On 22 January 2024, the National Crime Agency arrested the former mayor of Sevastopol, Dmitry Ovsyannikov, on suspicion of sanctions violations and money laundering. The charges relate to Ovsyannikov opening a Lloyds Banking Group bank account and then depositing £76,000 into that account.
This is the first time that UK prosecutors have charged a suspect under the UK sanctions regime post-Brexit. Interestingly, Ovsyannikov, who had been sanctioned by the UK since 2017, had his EU designation previously annulled by the Court of Justice of European Union on 26 October 2022 (Case T-714/20).
On 23 January 2024, Ovsyannikov pleaded not guilty to all charges. Following a 20 February 2024 hearing, Ovsyannikov’s case will commence on 10 March 2025.
*Marie Soriano (trainee) contributed to this article.
