Rapid expansion of European sanctions against Russia

Rapid expansion of European sanctions against Russia

Now that the hoped peace negotiations between Russia and Ukraine are in stalemate, the European Union is increasing the pressure on Russia with successive sanctions packages. While the Foreign Ministers of the Member States adopted the 17th package on 20 May, the European Commission announced already the 18th package on 10 June. What stands out?

Russian shadow fleet

The existing lists of sanctioned companies, persons and vessels have been further expanded. Many new ships have been included that are considered part of the so-called Russian shadow fleet because they sail under a different flag than the Russian one. The 17th sanctions package focuses in particular on the Russian shadow fleet that transports oil. The total number of sanctioned ships – including the proposed 18th sanctions package – exceeds 400. In addition, a total of more than 800 companies will be faced with stricter restrictions on dual-use goods.

Oil price cap and Nord Stream

The proposed 18th sanctions package proposes, in addition to a further expansion of sanctions lists, to lower the oil price cap from $60 to $45 per barrel. This will put the cap below the market price and Russia will no longer be able to supply oil to the EU for a profitable fee or at cost price. Proposals are also being made that will affect the Nord Stream gas pipelines. In this way, the EU wants to prevent the exploitation of Nord Stream from generating income for Russia. The intention is for these sanctions to remain in place after the war. In doing so, the EU is making a fundamental choice not to return to the situation before the war, even if peace were to be concluded at some point. It is therefore quite possible that other sanctions – for example the export ban on critical military goods – will also remain in place after the end of the military conflict.

The enforceability of the ban on re-exports to Russia from third countries remains cumbersome. The EU is trying in various ways to prevent sanctions from being circumvented in relation to the sanctions that were previously announced. The EU wants to target others who help Russia's military industry, such as arms manufacturers in China. They will be dealt with more severely, for example by also being placed on the list of companies subject to an export ban and whose assets must be frozen.

Coping with circumvention

In the 17th sanctions package, the EU also announced that it had reached agreement with like-minded countries on the List of Common High Priority Items previously drawn up by the EU. Companies must exercise special care with regard to these goods and third countries may not re-export these goods to Russia. In practice, these are often goods that can be used to make missiles or drones. This not only includes explosives, but also electronics used to control a drone.

The EU also drew attention to the List of Economically Critical Goods, with regard to which companies and third countries must be particularly vigilant. This concerns 30 categories of goods for industrial use, ranging from iron, steel, machinery, electronics, vehicles to vessels. So stay alert when dealing with these goods, even if you are not doing business directly with Russia!

Swift

Finally, the 18th sanctions package proposes to convert a ban on Swift messaging, which is used by banks and the financial sector, into a total transaction ban. 22 new banks are added to the list of institutions for whom transactions via Swift are no longer possible. Whether this means a total ban for Swift or a total transaction ban in general remains to be seen.