of the 10th Sanctions Package
On February 25th, the European Union implemented its 10th package of sanctions, which broadens the range of economic and restrictive actions taken against the Russian Federation, including its economy, citizens, and organizations. The 10th sanctions package comprises council regulations and decisions, as follows:
- Council Regulation (EU) 2023/426 of 25 February 2023 and corrigendum to it;
- Council Implementing Regulations (EU) 2023/428/429/430 of 25 February 2023;
- Council Decision (CFSP) 2023/431 of 25 February 2023;
- Council Decision (CFSP) 2023/432 of 25 February 2023;
- Council Decision (CFSP) 2023/433 of 25 February 2023;
- Council Decision (CFSP) 2023/434 of 25 February 2023.
This client alert focuses on some key economic aspects of this sanctions package. We advise you to get acquainted with the foregoing acts in the Official Journal of the European Union (Vol. 66 of 25 February 2023).
Asset freeze and the prohibition to make funds and economic resources available
The European Union has extended its list of Russian nationals and entities subject to asset freezes, restrictions on access to economic resources, and travel bans. 87 individuals and 34 entities have been added to the list.
The new list of designated persons from now on include inter alia :
- Alfa-Bank (JSC), Rosbank (PJSC), Tinkoff Bank (JSC), The National Wealth Fund of The Russian Federation and the Russian National Reinsurance Company ;
- Writers, presenters, media executives and organizations said to be spreading disinformation and propaganda ;
And more broadly, numerous designations have been adopted, encompassing a significant number of Russian and Iranian companies that manufacture missiles, drones, aircraft, military vehicles, warships, control systems, and provide supplies to the Russian Armed Forces.
All funds and economic resources belonging to, owned, held or controlled by any natural or legal persons, entities or bodies, or natural or legal persons, entities or bodies associated with them, shall be frozen.
No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of natural or legal persons, entities or bodies, or natural or legal persons, entities or bodies associated with them.
Restriction on the Russian Nationals
Effective from March 27th, 2023, Russian nationals are prohibited from holding any positions within the governing bodies of EU “critical infrastructures” and entities.
- As defined by Regulation 2008/114/EC, a critical infrastructure refers to an asset, system, or component located within Member States that is necessary for sustaining essential societal functions, maintaining the health, safety, security, economic or social well-being of individuals, and whose failure to function properly would result in significant impact within a Member State.
- The new prohibition applies to European critical infrastructures and critical infrastructures identified or designated as such under national law, as defined in Directive 2008/114/EC, which applies until 18 October 2024.
- As from 18 October 2024, the new prohibition will apply to critical entities and critical infrastructures, as defined in Directive (EU) 2022/2557.
- This restriction does not apply to individuals who are nationals of a Member State, of a country member of the European Economic Area, or Switzerland.
Furthermore, the EU has imposed additional export bans on goods which could contribute in particular to the enhancement of Russian industrial capacities, e.g.
- critical technology and industrial goods, including electronics, LEDs, specialized vehicles, machine parts, spare parts for trucks and jet engines, and construction sector goods such as antennas, forklift trucks, and cranes.
Additionally, restrictions have been introduced on the import of goods that generate significant revenue for Russia, such as asphalt, synthetic rubber, carbon blacks and bitumen.
Facilitating divestment from Russia
Decision (CFSP) 2023/434 has introduced a temporary exemption from the prohibition of certain services in Regulation (EU) No 833/2014, aimed at facilitating the divestment of Union operators from the Russian market.
- This derogation is designed to help companies exit the market quickly and is limited in scope, allowing for the provision of services to and for the exclusive benefit of legal persons, entities or bodies resulting from the divestment until 31 December 2023.
- The competent authorities of the Member States are charged of ensuring that such services are not provided to the Russian government, military end-users, or for military purposes.
This decision also extends the duration of the exemption from the prohibition to enter into any transactions with certain Russian state-owned entities, provided that the transaction is essential for the wind-down of a joint venture or similar legal arrangement.
Introduction of new reporting obligations
Concerning frozen-assets, the European Union has strengthened the reporting obligations of individuals and institutions.
- Banks are now obligated to report to the authorities if they possess knowledge or have access to funds that are or should be frozen in accordance with EU regulations, including any transactions that occurred prior to the listings (within a 2-week period).
Additionally, Member States and the Commission are now subject to new reporting obligations regarding immobilized reserves and assets of the Central Bank of Russia.
Furthermore, all aircraft operators, regardless of whether they operate directly or through a third party, who provide non-scheduled flights between Russia and the European Union must furnish their respective competent authorities with all pertinent flight details prior to flight operation, and no later than 48 hours in advance.
The European Union has established a prohibition on providing gas storage capacity within its borders to Russian nationals, individuals residing in Russia, or legal entities and organizations established in Russia.
European authorities have revoked the broadcasting license of RT Arabic and Sputnik Arabic, adding yet another Russian state media outlet to the list of those affected.
- Besides, it is prohibited to advertise products or services in any content produced or broadcast by such channels, including through transmission or distribution by any of the foregoing means.