The EU has - as announced for several weeks in political debates - intensified the economic sanctions against Russia. In connection therewith, two regulations have entered into force:
- Council Regulation (EU) No 825/2014 of 30 July 2014 amending Council Regulation (EU) No 692/2014 concerning restrictions on the import into the Union of goods originating in Crimea or Sevastopol, in response to the illegal annexation of Crimea and Sevastopol.
- Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine.
In the following, the key provisions of these two Regulations will be described – according to a newsletter format, briefly and in excerpts. The newsletter starts with Regulation 833/2014 because this Regulation may be economically more relevant to German and European undertakings.
Generally speaking, the sanctions will take on a new dimension against Russia through these Regulations and will affect a great number of established business relationships between undertakings in the EU respectively Germany and Russian business partners.
1. Council Regulation (EU) No 833/2014
- According to Article 2 of this Regulation, it shall be
prohibited to sell, supply, transfer or export, directly or
indirectly, dual-use goods and technology to any natural or legal
person, entity or body in Russia or for use in Russia, if those
items are or may be intended, in their entirety or in part, for
military use or of for a military end-user. As a consequence, a
large number of transactions with Russian business partners will
potentially not be possible any more. Although the prohibition
requires for military use or a military end-user, however, as it is
sufficient that the goods "may be intended" for military
use or for a military end-user, the scope of application of this
provision is rather wide. Pursuant to Article 2 (1) second
sentence, the Russian military is excluded per se as recipient of
dual-use goods and technology.
In particular, the inclusion of dual-use goods and technology may have a substantial impact, since a wide range of goods could be affected (from machine-tools through chemicals to electronic semiconductors etc.)
Shipments based on contracts concluded before 1 August 2014 shall not be affected, in case the competent authority (in Germany the Federal Office of Economics and Export Control, Bundesamt für Wirtschaft und Ausfuhrkontrolle – BAFA) grants an authorisation.
- According to Article 3 of the new Regulation, the export of
technologies as listed in Annex II is subject to authorisation. The
technology listed concerns mainly the oil and gas sector. In
accordance with the Regulation, an authorisation shall not be
granted, if the technologies are intended for the use in projects
related to deep water oil exploration and production, Arctic oil
exploration and production, or shale oil projects in Russia.
However, the Regulation provides in Article 3 as well, that an authorisation may be granted where the intended export concerns the execution of an obligation arising from a contract concluded before 1 August 2014.
- Furthermore, the access to capital markets by state-owned banks
or state-oriented banks is restricted by certain prohibitions.
Article 5 prohibits direct or indirect purchases and sales of, and
brokering or assistance with respect to transferable securities and
money-market instruments with a maturity exceeding 90 days. The
respective banks listed in Annex III are Sberbank, VTB Bank,
Gazprombank, Vnesheconombank (Veb) und Rosselkhozbank. The
effective date is 1 August 2014 as well.
Other financial services (e.g. deposit business, payment services and loans) are not covered by this Regulation and, hence, shall not be restricted. This does not apply to banks as referred to in Article 5 in connection with Annex III.
- In addition, the provisions contain reporting and communication requirements among the member states which shall ensure an harmonised and concerted approach.
- Further prohibitions are, among others:
- The performance of technical assistance related to the goods and technologies listed in the Common Military List
- The provision of financing or financial assistance for the sale, supply, transfer or export related to the goods and technologies or any technical assistance in connection therewith listed in the Common Military List.
The Regulation also contains a provision permitting the fulfilment of contracts concluded before 1 August 2014 in this regard.
2. Council Regulation (EU) No 825/2014
This Regulation contains prohibitions, especially with regard to
the infrastructure sector, namely in the areas of transport,
telecommunications or energy. These prohibitions are comprehensive
and relate to, for example, the granting of any financial loan or
the acquisition of participations in these sectors of the economy
in Crimea or Sevastopol (Article 2a No 1a).
Furthermore, far-reaching prohibitions are imposed for the areas of oil, gas and mineral resources (the new concept of "mineral resources" is laid down in Annex II by listing of the corresponding resources).
Article 2b extends the prohibition to direct or indirect technical assistance and brokering service (e.g., the negotiating of a sale contract) related to the sanctioned economic sectors.
According to Article 2c, it shall be prohibited to sell, supply, transfer or export the equipment and technology as specified in Annex III, in particular for the transport or the production of oil or gas, – directly or indirectly – to any natural or legal person, entity or body in Crimea or Sevastopol or for
use in these areas.
Article 2c No 5 and Article 2d contain key date regulations (30 July 2014) for the fulfilment of contracts concluded before the key date.
3. Amended Council Regulation (EU) No 269/2014
In this context we would like to point out that the Council Regulation (EU) No 269/2014 concerning restrictive measures in view of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine has been again amended and extended by Council Regulation (EU) No 811/2014 of 25 July 2014 as well as by implementing Council Regulation (EU) No 810/2014 of 25 July 2014 and (EU) No 826/2014 of 30 July 2014. The Regulations provide for the freezing of funds of certain persons and entities and restrictions on certain investments as a response to the illegal annexation of Crimea and Sevastopol.
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.