Newsletter

Update on the Sanctions development in connection with the invasion of Ukraine - EU's fifth sanctions package

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War ruins

On Friday 8 April 2022, the EU imposed additional sanctions in response to the Russian invasion of Ukraine. These include extensive additions to the asset freeze list, by listing over 200 new individuals in Putin's inner circle and 18 entities, amongst which four banks representing 23 % of the Russian banking market and two shipyards. The new regulations also generally ban Russian vessels from EU ports and impose further prohibitions on both export to and import from Russia.

Please note that these updates do not provide an exhaustive description of all sanctions in place, and they may not be construed as legal advice. Any person or entity involved in business activities in any way related to Russia, Belarus or Ukraine should carefully assess whether and how they are affected by the new sanctions. Schjødt's sanctions team is ready to assist in this regard.

SECTORAL RESTRICTIONS AND RESTRICTIONS ON TRADE

EU's fifth sanctions package both expands the scope of previous sanctions and imposes new types of restrictions on trade with Russia and Russians. A general comment to the new sanctions, in particular the new lists, is that whereas it has previously been rather evident for commercial players which lists to check to verify whether their particular goods or services are subject to any restrictions as to trade with Russia or Russians, it is increasingly challenging to maneuver through the landscape in search of types of goods and services, as several lists may be of relevance.

The dedicated advanced technologies list contained in Annex VII has been updated with a new "miscellaneous" category, in which you will find certain oil and gas exploration and production products, quantum computers, manufacturing equipment, energetic materials etc. It is generally prohibited to sell, export, provide services etc. related to these goods and technologies to Russia or Russians.

The prohibitions on sale and export of and provision of services in relation to etc.  goods and technology and related services suited for oil refining have been expanded to also include gas liquefaction and the list in Annex X has been updated with new items.

The prohibitions on sale and export of and provision of services in relation to etc. goods and technology and related services suited for aviation have been expanded to also include jet fuel and fuel additives and Annex XX has been added.

Further prohibitions on sale and export of and provision services in relation to etc. are imposed on certain goods and technology that could contribute in particular to the enhancement of Russia's industrial capacities, as listed in a new Annex XXIII. The list consists of a vast mixture of products, for instance certain flowers, wood, paper products, fabrics, bricks, glass, steel, various metals products, machines and vehicles. Certain exemptions apply, and the prohibition does not apply to the execution until 10 July 2022 of contracts concluded before 9 April 2022.

The EU has further targeted the Russian economy by imposing purchase and import restrictions on certain Russian goods, and provision of services in relation to such goods.

A new Annex XXI lists a variety of goods, and includes e.g. certain fertilizers, wood, alcoholic beverages, cement, concrete, caviar, cruise ships and other specified vessels, etc. These are categorized as goods that generate significant revenues for Russia. Certain exemptions apply to the prohibition, and the prohibition does not apply to the execution until 10 July 2022of contracts concluded before 9 April 2022.

The same type of restriction is imposed on coal and other solid fossil fuels, as listed in a new Annex XXII. The prohibition does not apply to the execution until 10 July 2022 of contracts concluded before 9 April 2022.

As from 16 April 2022, it will be prohibited to provide port access to Russian flagged vessels, and vessels that have changed from a Russian flag or registration after 24 February 2022, to any port within the EU. For this purpose, the regulations define "vessel", and allows a number of exemptions, e.g. for import/purchase of oil or gas, and for coal and other fossil fuels until the above mentioned prohibition on these enters fully into force on 10 August 2022.

As from 16 April 2022, it is also prohibited for Russian transport undertakings to transport goods by road within the EU. A similar yet not identical range of exemptions apply as for vessels.

FINANCIAL SANCTIONS

The financial sanctions are also expanded in the EU's fifth package and include both new types of sanctions and tightening of existing sanctions.

The prohibition on credit institutions against accepting deposits from Russians (physical persons) exceeding EUR 100 000 per institution has been expanded to also include crypto. More specifically, it is prohibited to provide crypto-asset wallet, account or custody services to Russian physical and legal persons provided that the total value of crypto-assets of such person in such provider exceeds EUR 10 000.

The prohibition against selling Euro denominated transferable securities to Russians is expanded to include also transferable securities denominated in any EU member state's currency and issued after 12 April 2022.

The prohibition against selling Euro denominated banknotes to Russians is expanded to include also banknotes denominated in any EU member state's currency.

A new prohibition against the award or continuation of certain public or concession contracts to any Russian entity or person, or entities that are either owned by 50 % or entities or persons acting on behalf or at the direction of a Russian entity. This appears to extend to contracts where the Russian link accounts for 10 % or more of the contract value. Certain exemptions apply, and the prohibition does not apply to the execution until 10 October 2022 of contracts concluded before 9 April 2022.

Another new prohibition is imposed on provision of any direct or indirect support, including financing and financial assistance, under a national programme or contract within the EU to any Russian entity with over 50 % public ownership or public control. Certain exemptions apply.

Finally, prohibitions are imposed in respect of trusts and similar arrangements where a Russian is either on the trustor or the beneficiary side. The prohibition extends to any Russian entity or person, and entities that are either owned by 50 % or controlled by such person or entity, or acting on behalf or at the direction of any of the aforementioned. Certain exemptions apply, and wind-down activities are permitted until 10 May 2022 for arrangements concluded before 9 April 2022.

New entries on the asset freeze list

The strictest financial sanctions are imposed on the persons listed on the asset freeze list, and a general prohibition applies to transacting with persons and entities on the list and their assets. The prohibition extends to entities owned by more than 50 %, or otherwise controlled, by such persons.

The EU on 8 April 2022 added a further 216 persons from Putin's inner circles to the list. Additionally, 18 corporates were listed. Amongst these are the banks Otkritie, Novikombank, Sovkombank and VTB Bank and the shipyards PO More Shipyard and Yantar Shipyard.

MORE SANCTIONS AHEAD?

The EU informs it has already commenced discussions around the sixth package. Several member states are said to be putting pressure on others to move ahead with import restrictions on Russian oil and gas.

Norway has stated generally that it will follow the sanctions implemented in the EU, thus we do expect these new sanctions to be carried through in Norwegian legislation. The second batch of sanctions implemented in Norway (covering the EU's fourth package) followed a week after it was implemented in the EU, and we may expect a similar time span for Norwegian authorities to turn this around and implement into Norwegian law, perhaps somewhat later due to the Easter holiday.

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