Sanctions against Russia: implementation in practice
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Sanctions against Russia: implementation in practice

The EU sanctions against Russia are a moving target. Some examples and tips for proper implementation in practice.

Sanctions against Russia: The EU’s 8th package

Shortly after Russia launched its invasion of Ukraine, sanctions quickly became the tool of choice for defending Western values against this breach of international law. The EU wasted no time in imposing a first round of financial sanctions on February 23, 2022, and has steadily ratcheted up its sanctions against Russia since then, with an eighth package gaining approval on October 6 and taking effect one day later.

The frequency of changes to the sanctions since the war began has led to considerable problems and uncertainty in their implementation. Companies previously unfamiliar with export control regulations must now check their Russian business activities for any current restrictions under EU embargo regulations. The EU uses export control mechanisms for its sanctions, so it’s critical for any company wishing to maintain business relations with Russia to have a basic knowledge of export controls. 

The following four checks, in the order presented, help you safely navigate the legal requirements of export control law in the EU.

Check 1: The business partner check

Who am I shipping to?

The first step is to check whether there are any bans on the direct or indirect provision of economic and/or financial resources to your business partner. The various sanctions packages include comprehensive bans of this nature against individuals, legal entities, and organizations.

Companies with a Compliance Screening solution from AEB can automatically check whether their business partners are sanctioned. EU bans on the direct provision of economic and/or financial resources are updated each day in the Consolidated Financial Sanctions Parties List (CFSP list). Besides the CFSP list, businesses can also select other lists relevant to their operations from AEB’s extensive library of restricted party lists.

Business dealings with the Russian state-owned enterprises listed in Annex XIX of Embargo Regulation 833/2014 are prohibited, for example. These enterprises appear alongside other Russian financial institutions on the “Restrictions on Access to the Capital Market” list issued by the Council of the European Union. The legal implications of a match, and thus the question of further business relations with the enterprise concerned, depend on the list where the match is found and the legal consequences associated with the listing.

But be careful, because the bans on the provision of economic and/or financial resources and the bans on doing business with state-owned enterprises apply to both direct and indirect business. This means that even a business partner not directly subject to such bans may be subject to an indirect ban if owned by a sanctioned entity such as an oligarch. Learn more in our article The case of Roman Abramovich: The impact of financial sanctions.

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Check 2: The embargo check

Where am I shipping to?

When doing business with a sanctioned country, you must prioritize the terms of the embargo in your screening process. For Russia, the situation is as follows: Sanctions were imposed under EU Embargo Regulation No. 833/2014 back in July 2014 after Russia annexed Crimea and occupied Donetsk and Luhansk.

The EU continuously adapts these sanctions from 2014 with new packages – most recently on October 6.
The embargo regulation against Russia has various annexes covering a broad spectrum of goods ranging from high-tech to luxury goods such as wines and spirits. The goods in question are often identified in the annexes by commodity code. Companies need to check whether they are affected by the listings.

Unlike the EU Dual-Use Regulation 2021/821, the embargo regulations cover not only the export and transfer of such goods but also their sale and delivery. This has far-reaching consequences in practice, as the following two examples illustrate:

Sanctions against Russia: Example 1

A Dutch company enters into a sales contract with a Russian business partner for goods listed in Annex XXIII of the Embargo Regulation 833/2014 against Russia. The contract stipulates delivery of the products not to Russia but to a company based in Georgia. Even if the business partners of the Dutch company offer assurances that the goods are ultimately destined for Georgia and will not be shipped on to Russia, the Dutch company is subject to Embargo Regulation 833/2014 against Russia by virtue of the sales contract entered into with the Russian business partner. Entering into a contract for these goods is prohibited and results in an embargo violation for the Dutch company.

Sanctions against Russia: Example 2

A German company enters into a sales contract with a Georgian company for goods listed in Annex XXIII of Embargo Regulation 833/2014. The goods are to be delivered to Russia through the Georgian contractor. The broad scope of EU embargo regulations through the concept of delivery means that providing listed goods in any way to a recipient in an embargoed country falls under the purview of the respective embargo regulation. The German company is exporting goods to Georgia under the general provisions of the Dual-Use Regulation and Foreign Trade and Payments Ordinance. There is also a delivery to Russia that falls within the scope of the prohibition of Art. 3k of Regulation 833/2014 for goods listed in Annex XXIII. Violations of EU sanctions regulations are punished under the German Foreign Trade and Payments Act as embargo violations and, depending on the case, may lead to criminal charges.

Questions 1 and 2 complete the embargo-specific tests. The general provisions of export control law also apply.

Business with Russia remains possible in principle as long as the EU does not impose a total embargo on Russia. Business activities that are not restricted based on the business partner or under embargo regulations must be reviewed under the Dual-Use Regulation and the Foreign Trade and Payments Ordinance. Questions 3 and 4 address these checks.

Observing country embargoes at all times

Many jurisdictions around the world issue and frequently amend various embargo measures. AEB's Export Controls software runs automated embargo checks for your export transactions to help you prevent violations of worldwide embargoes.

Check 3: The goods check

What am I shipping?

Answering this question checks the licensing requirements for the export of listed goods. This question is not relevant for business transactions with Russia, as listed goods are subject to a comprehensive ban.

Check 4: The catch-all check

What will the goods be used for?

The last question checks designated use. This check must be applied to all goods not subject to restrictions from the previous steps. A license is required for these goods if there is knowledge of one of the end-uses described in Art. 4 (1) and Art. 5 of the EU Dual-Use Regulation.

Sanctions against Russia: Summary

The EU sanctions against Russia are complex and subject to frequent changes. Companies that wish to do business with Russia must take the appropriate organizational measures to enable a prompt response to changes in the legal requirements. This makes comprehensive knowledge of EU export control law essential.