EU’s 12th Sanctions Package and New UK Trade Sanctions on Russia

On 18 December 2023, the Council of the European Union (EU) adopted the 12th package of sanctions on Russia, in response to the ongoing invasion of Ukraine. This new round of trade sanctions most notably targets the Russian diamond trade and oil tanker sales, as well as introducing fresh re-exportation restrictions on certain goods and asset freezes on those acting in Russia’s military and defence sectors. However, as we explain below, the measures as implemented were not as far-reaching as the EU had originally proposed.

The EU's diamond ban is part of an agreement reached by countries in the Group of Seven (G7) to target diamonds¹, one of the last non-sanctioned resources which is an important source of revenue for Russia. In line with the G7 agreement, the UK has also introduced measures which prohibit the import of diamonds. In addition, the UK recently introduced new restrictions on certain metals, including aluminium, nickel and copper.

We discuss the key measures introduced by the EU and UK in further detail below.

A. EU’s 12th Sanctions Package

(i) Diamond Ban

Council Regulation (EU) No 833/2014 (Regulation 833/2014) has been amended to include a new Article 3p². From 1 January 2024, the purchase, import or transfer of diamonds or diamond products originating in Russia or transiting through Russia is prohibited. This initial ban will be extended to cover diamonds originating in Russia or exported from Russia that are processed in a third country and that are larger than 1.0 carat (with effect from 1 March 2024), with the weight limit on third country processed diamonds falling to 0.5 carats with effect from 1 September 2024.

The EU has also prohibited the provision of technical assistance, brokering services, finance and financial assistance (which includes (re)insurance) in connection with the activities referred to above.

(ii) Strengthening the oil price cap

The ‘oil price cap’ was adopted in December 2022 by G7 countries, the EU and Australia, and targets the supply and delivery of Russian crude oil to third countries. It was introduced with the intention of reducing the revenue Russia receives from the export of oil, while also stabilising global energy prices, and avoiding the risk of poorer countries being exposed to the price hike that a complete ban might have caused. The cap is currently set at US$60 per barrel of crude oil (for more information on the introduction of the oil price cap, see our previous update here).

In relation to the price cap, new Article 3na of Regulation 833/2014 requires Member States to share information among themselves about deceptive practices adopted by parties evading the oil price cap, such as ship-to-ship transfers and Automatic Identification System manipulation. In response to sanctions on the oil trade, there has been a build-up of a so-called ‘shadow fleet’ of tankers with obscure ownership information to evade sanctions³. Recent estimates suggested that this ‘shadow fleet’ has grown to more than 500 tankers, many of which are believed to lack insurance cover⁴. The EU intends that the information sharing requirements introduced by Article 3na will help identify ‘shadow fleet’ vessels being used to contravene the oil price cap, and that the European Maritime Safety Agency will support the information sharing⁵.

(iii) Prohibition on the sale of tankers to transport crude oil and petroleum products

It is now prohibited to sell tankers to transport crude oil or petroleum products falling under HS Code 8901 20 to Russia or for use in Russia, under the new Article 3q of Regulation 833/2014.

National competent authorities may provide a derogation for the sale of tankers, under certain conditions, and EU businesses must notify their national competent authority before 20 February 2024 of any sale or other transfer of ownership of tankers that occurred after 5 December 2022 (the date that the oil price cap came into force) and prior to 19 December 2023.

Malta has moved quickly to publish guidance on Article 3q, along with its template reporting and derogation application forms⁶. Other Member States may follow suit.

(iv) Re-exportation ban – ‘No Russia’ clause

From 20 March 2024, operators subject to EU jurisdiction must insert a ‘No Russia’ re-exportation clause into contracts for the sale, supply, transfer or export of sensitive goods and technology – for example, jet fuel and firearms – to third countries, pursuant to the new Article 12g of Regulation 833/2014. These clauses must specifically prohibit the re-exportation of such goods from third countries to Russia or for use in Russia, unless they are being exported to a partner country (being the US, UK, Japan, South Korea, Australia, Canada, New Zealand, Norway or Switzerland). 

This Article is a diluted version of what was reportedly proposed. As finalised, it only covers sensitive goods and technology, whereas it had been reported that the EU had originally proposed applying the requirements to goods of any commodity code – which was resisted by a majority of Member States⁷.

(v) Import ban on liquefied propane gas (LPG)

As part of the 12th sanctions package, Annex XXI of Regulation 833/2014 has been amended to include liquefied propane gas (LPG), with grandfathering of existing contracts for a period of maximum 12 months. EU businesses are now prohibited from purchasing, importing or transferring LPG into the EU if it originates in Russia or is exported from Russia.

(vi) New designations

Measures were included in the 12th sanctions package to designate over 140 additional individuals and entities under Council Regulation (EU) No 269/2014 (as amended). Those newly designated include individuals and entities in Russia’s military, defence and IT sectors and also in its insurance sector, notably AlfaStrakhovanie Group.

B. New UK trade sanctions

On 14 December 2023, the Foreign, Commonwealth & Development Office (FCDO) and the UK’s Department for Business and Trade (DBT) announced the UK’s implementation of a ban on diamonds and certain metals⁸. 

The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2023¹⁰ contain import prohibitions on copper, nickel and aluminium, while also expanding the existing export ban on luxury goods to include technical assistance, financial assistance (including (re)insurance) and brokering services. 

The diamond ban, which took effect from 1 January 2024, has been implemented via the Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2023. As with the EU’s ban, it covers both diamonds that originate in Russia and those that have been consigned from Russia. 

However, unlike the EU, the UK prohibition contains no exemption for diamonds processed in a third country under a certain size. This means that there is some divergence between the sanctions regimes in the EU and UK, and companies subject to both jurisdictions should ensure they are compliant with both regimes, and not simply relying on the EU exemption. 

C. Looking ahead

With the No Russia clause and the tanker sales ban reportedly receiving pushback from EU Member States¹¹, the EU has not gone as far as original proposed in this latest round of sanctions.

The trade restrictions that have been introduced, such as the diamond ban as well as the additions to the EU’s Consolidated List, give this 12th package a feeling of being an incremental strengthening of sanctions against Russia by the EU.   

Enforcement of existing sanctions is therefore likely to be firmly on regulators’ agenda going forward. To that end, it is interesting to note the EU has taken steps to shore up the oil price cap through its tanker sales reporting and new information sharing requirements, and it is not long since the UK announced the creation of a dedicated trade sanctions enforcement body, the Office of Trade Sanctions Implementation (OTSI). 

¹G7 Leaders' Statement: 6 December 2023
²Council Regulation (EU) 2023/2878 of 18 December 2023 amending Regulation 833/2014
³Russia’s growing dark fleet: Risks for the global maritime order
⁴Growing tanker fleet, cheaper freight challenge Russian oil price cap | Reuters
⁵Questions and Answers: twelfth package of restrictive measures against Russia
⁶2024.01.10-Guidance-Mandatory-Notification-of-Tanker-Sales-Compliance-with-Article-3q-of-12th-EU-Sanctions-Package.pdf (gov.mt)
⁷EU nears deal on 12th Russia sanctions package, softens tanker sale ban - sources | Reuters
⁸New trade and financial sanctions against Russia come into force  
⁹The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2023
¹⁰The Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2023
¹¹EU nears deal on 12th Russia sanctions package, softens tanker sale ban - sources | Reuters