On October 6th, the Council of the European Union adopted the 8th EU sanctions package against Russia. One day earlier, the permanent representatives of the member states had already agreed, among other things, on the legal requirements for a price cap on Russian oil imports proposed by the G7 countries.
The sanctions package contains new far-reaching measures that will affect a multitude of economic sectors:
New listing of persons and companies
The EU is extending the sanctions list to include individuals and companies involved in the illegal annexation of Ukrainian territories and in the sham referendums preceding the annexation.
In addition, financial sanctions are imposed on individuals and companies involved in the military sector (e.g. high-ranking military officials, companies supporting the Russian troops). Actors who spread disinformation are also listed. Furthermore, the measures target decision-makers, oligarchs, propagandists and other actors involved in undermining Ukraine's territorial integrity.
The EU is also introducing a new criterion for listing individuals. In future, financial sanctions may also be imposed on persons who enable or encourage circumvention of sanctions.
New export restrictions
New export restrictions are expected to further restrict Russia's access to military, industrial, and technological products and weaken its ability to further develop its defence and security sectors. In future, export restrictions will apply in particular to the export of coal (including coking coal), special electronic components that can be used in Russian weapons, aviation technologies and special chemicals.
New import restrictions
The EU is also extending the list of goods covered by import restrictions: in future, steel products finished or partially finished in Russia, certain machinery, equipment, plastics, vehicles, textiles, footwear, leather, ceramics, certain chemicals and non-gold jewellery may no longer be imported into the EU.
Introduction of a price cap for Russian oil
The new sanctions package creates the legal foundation for Russia only being able to sell oil to major buyers on the world market at much lower prices in the future. The EU is thus implementing the G7 agreement to introduce an oil price cap. Under the new regulation, European companies are only allowed to transport Russian oil to third countries under the condition that the price remains below a pre-determined "cap."
The EU is closely coordinating the introduction of the oil price cap with its G7 partners. For crude oil, the oil price cap is expected to take effect from 5 December 2022, and for refined petroleum products from 5 February 2023.
Further measures against Russian state-owned enterprises
The new sanctions package prohibits EU citizens from taking up positions in certain Russian state-owned companies.
Additionally, all transactions with the Russian Maritime Register are being prohibited, in that it is being added to the list of enterprises owned by the Russian state.
Further measures in the financial, IT and services sectors
The already existing bans regarding crypto shares are being extended. The sanctions also now cover all forms of crypto wallets, crypto accounts and other custodial services.
Furthermore, the scope of services that may no longer be provided to the Russian government or Russian legal entities is being expanded. These now include IT services, legal advice, and architectural and development services.
What does this mean for companies?
Companies with business in Russia must immediately check whether and to what extent the export or purchase of products or the provision of services falls under the new restrictions. In addition, all business partners should be checked against an up-to-date sanctions list.
How is the effect of the oil price cap vis-à-vis third countries to be assessed?
The EU's new oil price cap aims to be effective vis-à-vis third countries. To the extent that third countries (such as India) purchase Russian oil above the set price limit for oil, the planned mechanism will lead to EU companies no longer being allowed to engage in oil transportation (or only being allowed to do so at significantly higher prices that compensate for the excess price).
With this, at least an indirect influence is being exerted on companies also outside the jurisdiction. The option to engage service providers from non-sanctioned states still exists, however. This also demonstrates how the effectiveness of the oil price cap greatly depends on the cooperation of other non-EU and G7 states, as well as the difference between this and sanctions that actually have an extraterritorial effect.
T +49 221 2091 448
M +49 173 3088 038