EU Adopts New Wave of Sanctions Against Russia: Majority of Oil Imports to Be Restricted
10 June 2022
The European Commission has reported on 3 June 2022 that it welcomes the adoption of the sixth package of restrictive measures (sanctions) against Russia. The package was published in the EU Official Journal on the same day (the hyperlinks are provided below). The package also imposes further sanctions against Belarus considering its involvement in the aggression. As with previous sanctions packages, they have reportedly been coordinated with international partners.
The main and remarkable element of the sixth package is that it imposes an import ban on all Russian seaborne crude oil and petroleum products. This covers 90% of the EU’s current oil imports from Russia. The ban is subject to certain transition periods. There is also a temporary exemption for pipeline crude oil. Sanctions in the EU require the unanimous consent of its 27 Member States. It has been reported that Hungarian Prime Minister Viktor Orban had blocked the latest package of measures for weeks, and finally agreed to it, but with the pipeline exemption in place, as a concession to Hungary and other landlocked countries.
Beyond sanctions, the EU has made it clear that reducing its dependence on energy imports from Russia is an urgent imperative. The Commission adopted its REPowerEU Plan on 18 May 2022 to end dependence on Russian fossil fuels as soon as possible and to tackle the climate crisis.
The EU has also imposed sanctions on high-ranking military officers and other individuals who committed war crimes in Bucha and who are responsible for the inhuman siege of the city of Mariupol. The package additionally includes entities involved in the military sector, and manufacturing equipment and software, used in Russia's aggression against Ukraine. The new listings include political, propaganda and business figures, and individuals with close ties to the Kremlin.
In sum, the sixth package comprises the following main sanctions against Russia:
- Oil import restrictions: In 2021, the EU imported €48 billion worth of crude oil and €23 billion of refined oil products from Russia. Member States have now decided to impose an embargo on the imports of these products. These sanctions will come into force with immediate effect and will phase out Russian oil imports. For seaborne crude oil, spot market transactions and execution of existing contracts will be permitted for six months after entry into force, while for petroleum products, these will be permitted for eight months after entry into force. Member States who have a particular pipeline dependency on Russia can benefit from a temporary exemption and continue to receive crude oil delivered by pipeline, until the Council decides otherwise. Due to its specific geographical exposure, a special temporary derogation until the end of 2024 has been agreed for Bulgaria which will be able to continue to import crude oil and petroleum products via maritime transport. Croatia also benefits from a (more limited) exemption.
- Oil transport services: After a winding-down period of 6 months, EU operators will be prohibited from insuring and financing the transport, in particular through maritime routes, of oil to third countries. This will make it particularly difficult for Russia to continue exporting its crude oil and petroleum products to the rest of the world since EU operators are said to be major providers of such services.
- Financial and business services measures: An additional three Russian banks, including Russia's largest bank Sberbank, and one additional Belarussian bank have been removed from SWIFT. These banks are, the Commission opines, critical for the Russian financial system and Putin's ability to further wage war, and the new sanctions will solidify the isolation of the Russian financial sector from the global system. Other prohibitions include the provision of certain business-relevant services - directly or indirectly – such as accounting, auditing, and public relations services to the Russian government, as well as to legal persons, entities or bodies established in Russia.
- Export restrictions: The list of advanced technology items banned from export to Russia has been expanded to include additional chemicals that could be used in the process of manufacture of chemical weapons, already controlled since 2013 for other destinations such as Syria.
- Belarusian entities subject to restrictions: The list has been significantly widened (from 1 entity to 25). This is related to authorisations for the sale, supply, transfer or export of dual-use goods and technology, as well as goods and technology which might contribute to Belarus's military and technological enhancement, or to the development of its defence and security sector.Member States will be responsible for the implementation of the sanctions. It is still possible for additional sanctions to be tabled, in response to the evolution of Russia's aggression against Ukraine.
On the same day as the package was adopted, the individual measures contained in the package were published in the Official Journal of the European Union. Hong Kong companies wishing to examine the measures in more detail should click on the following links for the new Regulations and Decisions, and Notices.
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