It has been three years since the war in Ukraine began, and the EU has now adopted its 16th sanctions package against Russia. This has resulted in an unprecedented number of regulations that businesses must consider when engaging in trade with Russia. The scope of these regulations extends far beyond merely doing business with Russian state-owned enterprises or individuals directly held accountable for the war in Ukraine. Due to the complexity and vastness of the sanctions framework, we provide an overview of the key trends observed over the past years.
Sanctions with a broad scope
The sanctions against Russia cover a wide range of areas, including business activities in certain occupied territories, dealings with vessels from the so-called 'shadow fleet,' and restrictions on so-called 'dual-use goods.' The rationale behind the regulation of dual-use goods is that these items can be used for both civilian and military purposes. The annex to the EU Dual-Use Regulation lists ten distinct categories covering various technical specifications for certain products, including computers, sensors, and vessels.
Developments over the past three years
Over the past three years, European sanctions have been extensively used as a political tool against Russia in its war against Ukraine. It seems logical that sanctions would target influential individuals, restrict oil and gas imports, prohibit arms exports, and impose financial restrictions. However, the sanctions against Russia extend far beyond these measures. A key objective is to prevent the export of goods that could enhance Russia's industrial earning capacity.
Enforcement, investigation, and evasion of sanctions
International sanctions often involve complex regulations, and the sanctions against Russia are no exception. These sanctions are enforced in the Netherlands under the Sanctions Act 1977 and the Economic Offenses Act. Until a few years ago, criminal prosecutions in this area were rare, as such cases were not prioritized. However, this has changed significantly. Dutch Customs has conducted thousands of inspections, while the Fiscal Information and Investigation Service (FIOD) and the Public Prosecution Service have launched dozens of criminal investigations against individuals and businesses. Some of these cases have resulted in lengthy prison sentences or substantial fines. A significant number of these investigations pertain to suspected circumvention of sanctions.
Sanctions evasion has long been prohibited, but the obligations imposed on businesses to prevent such evasion have become far more stringent than in the past. As a result, it has become increasingly difficult for companies to assess whether sanctions are being circumvented via Russia's neighboring countries. Nevertheless, companies must ensure compliance. Dutch Customs closely monitors trade with so-called "transshipment countries," and in many cases, this has led to criminal prosecutions.
Additionally, the EU has tightened its approach. Brussels is strengthening its oversight to enhance the effectiveness of the sanctions. Since 2022, intentionally violating EU restrictive measures has been classified as a criminal offense under Article 38 of the Treaty on the Functioning of the European Union (TFEU), alongside other serious crimes requiring international coordination, such as terrorism, human trafficking, illicit arms trade, and corruption.
Particularly in the latest sanctions packages, groundbreaking rules have been adopted to prevent circumvention of the EU's restrictive measures, such as the mandatory "no re-export to Russia" clause in contracts, the obligation of EU companies to make every effort to ensure that legal entities established outside the EU that they own or control do not participate in activities that undermine the sanctions regulation, and notification requirements.
Directive on sanctions evasion
This shift in regulatory focus is evident in the European directive against sanctions violations and evasion, published last year and required to be transposed into national laws of EU member states by May 20, 2025. The directive applies to all EU sanctions, not just those against Russia. It introduces severe penalties, including high maximum prison sentences for individuals and fines for corporations, which may reach up to €40 million or 5% of the total global annual turnover. While there is much more to discuss regarding this directive, we highlight it as a clear indication that sanctions evasion is receiving increasing scrutiny, despite the existing complexity of sanctions regulations.
Compliance requirements
Companies that are – directly or indirectly – affected by sanctions in general, and those against Russia in particular, are now subject to far stricter compliance requirements. Firstly, the risk of enforcement has significantly increased. Secondly, businesses must also consider reputational risks and relationships with service providers, such as banks and accountants. The key challenge remains the ability to respond swiftly and substantively to new sanctions regulations. The 16th sanctions package, adopted on February 24, 2025, serves as a prime example.
Examples from the 16th sanctions package
For the transport sector, new regulations address potential Russian control over EU-based road transport companies to prevent circumvention of sanctions. Specifically, entities established in the EU that are at least 25% Russian-owned are prohibited from becoming road transport operators. Additionally, for businesses that had road transport operations before April 8, 2020, any change in capital structure is forbidden unless it reduces the Russian ownership stake below 25%.
Another example involves stricter export restrictions, with an expanded list of companies in countries other than Russia facing trade limitations. These include specifically designated companies in China, India, Kazakhstan, Singapore, the United Arab Emirates, and Uzbekistan, bringing the total number of restricted entities to over 700.
These are just two examples among many topics covered in the 16th sanctions package. Additional measures include further restrictions on the shadow fleet used to circumvent oil and gas sanctions and limitations on supplying technology for oil and gas exploration.
Another notable restriction targets Russia's industrial earning capacity. The 16th sanctions package imposes constraints on specific chemical substances and rubber, illustrating how detailed, extensive, and diverse these sanctions measures are.
Stay up to date to avoid legal risks
Three years after the start of the war, there is no indication that these sanctions and their enforcement will end anytime soon. Compliance, however burdensome, remains the best way to avoid complications with banks, accountants, or, in the worst-case scenario, Dutch Customs or the Public Prosecution Service. If you would like to know what the latest sanctions could mean for your company or if you would like to know if you are still compliant with current regulations, please contact Jikke Biermasz or Hugo van Aardenne.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
