Ukraine has now been under continuous bombardment by the Russian military for three years. Foreign trade law seeks, above all, to reduce these attacks by imposing export and import restrictions, and consistently tightening them, so as to limit the supply of military goods to the Russian army. This concerns not only direct deliveries from the EU to Russia, but also deliveries to and from third countries. On the import side, the aim is to prevent Russia from earning money through the supply of (intermediate) products, thereby strengthening its own military production. On the export side, numerous measures address the risk of circumvention deliveries to third countries. The fundamental problem here is that, in some countries, such as Turkey, China, or India, deliveries to Russia are not prohibited. The EU’s measures must therefore be designed to prevent goods from the EU finding their way to Russia via these countries. This is the focus of the most recent amendments to the Russia embargo, as well as the new rules under the 16th sanctions package. The obligation to prevent circumvention is not, as such, new; it should be recalled that this was already recommended to EU companies as far back as 1 April 2022, in a recommendation issued by the EU Commission.
This has now been tightened further:
- Listing of vessels and companies. It is now prohibited to supply the operating companies of the vessels concerned, or the corresponding companies, with any goods whatsoever, or to transfer funds or other assets to them. These measures target, on the one hand, the supply of dual-use goods to the companies concerned, which is already subject to authorisation in any event, and, on the other hand, any support services provided to the affected vessels in EU ports, or by EU companies.
- In this connection, further persons, organisations, and entities have also been added to the sanctions lists. The EU has introduced a further criterion for listing on a sanctions list: involvement in the military-industrial complex. This makes the direction of these latest sanctions particularly clear.
- There is a new import ban on Russian primary aluminium. The import of aluminium products was already prohibited. A transitional arrangement now applies here, under which up to 275,000 tonnes (80% of 2024 import volumes) may still be imported during the current year.
- Annex XL is supplemented by a new Annex XLVIII, which brings the following goods under the same expanded compliance and control requirements of Article 12gb: “generating sets with spark-ignition internal combustion piston engine” under CN code 8502 20, and “other switches” under CN code 8536 50.
- In addition, Annex VII now lists “Software” for the “development”, “production”, or “use” of CNC equipment,” and “video game controllers.”
- The exemption rules for deliveries for medical purposes have been clarified and tightened.
- There are further export restrictions on industrial goods.
- In the energy sector, the temporary storage and placement of Russian crude oil or Russian petroleum products under the free-zone procedure at EU ports has been completely prohibited.
- There is a prohibition on supplying goods, technology, and services for the completion of Russian LNG projects, in addition to crude oil projects in Russia.
- The software prohibition has been extended to cover oil and gas exploration software destined for Russia.
- There is now the option of extending the flight ban to third-country companies that operate domestic flights within Russia, or that supply aviation goods to Russian airlines or for flights within Russia.
- A prohibition on road transport of goods by companies at least 25% owned by Russian interests.
- Introduction of a complete transaction ban with respect to the following Russian (air)ports: Moscow’s Vnukovo and Zhukovsky airports, four Russian regional airports, the Volga river port of Astrakhan, the port of Makhachkala on the Caspian Sea, the seaports of Ust-Luga and Primorsk on the Baltic Sea, and Novorossiysk on the Black Sea.
- A prohibition on the provision of construction services by EU economic operators in Russia.
Also of particular interest is the extension of the financial restrictions to 13 financial institutions, which are to be disconnected from SWIFT. Those affected include Ak Bars Bank, the financial houses Uralsib and Sinara, Tochka Bank, NRBank, Roseximbank, Primsotsbank, BBR Bank, Kuznetskbusinessbank, Kuban Credit Bank, Mir Business Bank, as well as the payment organisations Payment Constructor and Petersburg Settlement Center. This is likely to significantly impair the ability to transfer funds to and from Russia. In addition, three banks have been added to the transaction prohibitions. There has also been a further restriction on trading in crypto-assets.
These are the key priorities:
Two topics are likely to be of particular significance for companies arising from these recent changes:
First, the EU legislator is once again placing considerable emphasis on measures against sanctions circumvention. EU companies should take note of Article 12gb, in force since 26 December 2024, under which risk analyses must be carried out for particularly sensitive goods, in order to assess the level of circumvention risk. In addition, appropriate measures must be implemented and continuously assessed. Ultimately, companies are required to put in place a system of suitable controls addressing the possibility of circumvention. This affects, above all, the mechanical engineering sector, but also electrical engineering, plant construction, vehicle technology, and the chemical industry. These strict compliance rules do not apply to the sale, supply, or transfer of these goods within the EU, or to allied countries: the United States, Japan, the United Kingdom, South Korea, Australia, Canada, New Zealand, Norway, Switzerland, Liechtenstein, and Iceland. Comparable controls are presumed to be in place in these countries.
Second, the disconnection of banks from the SWIFT system sends a clear signal that the intention is now also to restrict legitimate economic exchange with Russia. This is an important signal for affected companies that continuing to do business in Russia will become increasingly difficult to sustain going forward.
It is also worth noting that EU authorities are now permitted to exchange data on circumvention activities with allied states. It can be assumed that this will also result in companies of concern being reported to other Western states, or in the EU obtaining relevant information from those states in return.
