On 22 June 2015, the EU Council (the Foreign Ministers of the 28 EU Member States) adopted a decision (Council Decision 2015/971/CFSP) to extend the validity of the so-called ‘sectoral’ or ‘phase three’ sanctions, imposed by the EU against Russia over its role in the Ukrainian crisis, until 31 January 2016. The decision was published in the EU Official Journal and entered into force on 23 June 2015.
The sanctions in question were originally imposed by the Council Decision 2014/512/CFSP and implemented by Council Regulation 833/2014 of 31 July 2014 (in force as of 1 August 2014), and subsequently amended (expanding the scope of the sanctions) by Council Decision 2014/659/CFSP and Council Regulation 960/2014 of September 2014 (in force as of 12 September 2014).
‘Phase three’ sanctions in force
The phase three sanctions target Russia’s financial, oil and defence industries and include the following prohibitions and restrictions:
- Restriction on financing of certain Russian government-controlled banks, oil and defence industry companies;
- Restrictions on exports to Russia of oil and gas-related goods and technologies, and especially for the Arctic oil exploration and production, deep water oil exploration and production and shale oil projects;
- Restrictions on the provision of certain ‘associated services’ necessary for Arctic oil exploration and production, deep water oil exploration and production and shale oil projects (such as drilling, well testing, logging and completion services, supply of specialised floating vessels);
- Prohibition of the supply/sale/export/transfer of arms and military equipment to Russia or for use in Russia, as well as of dual-use equipment and technologies, if such equipment or technologies are intended for military end-use or for certain persons, entities or bodies listed in Regulation 833/2014 (as amended);
- Prohibition of technical and financial assistance related to the above restricted activities.
The Council Decision of 22 June 2015 did not amend the content or the scope of the existing sanctions, but only extended the period of their validity by 6 months (they were due to expire on 31 July 2015).
As stated the preamble to the Council Decision extending the validity of sanctions, the duration of the phase three sanctions is linked to the complete implementation of the Minsk ceasefire agreement signed by the leaders of Ukraine, Russia, Germany and France in February 2015. The deadline for the implementation of the Minsk agreement is 31 December 2015, following which the EU will once again assess the need to withdraw or extend the sanctions.
DLA Piper comment
The extension of the sectoral sanctions follows the extension of two previous set of sanctions against Russia – asset freezes and travel bans for certain ‘blacklisted’ individuals (including high level politicians and government officials, businessmen and participants in military organisations), companies entities and bodies (extended until 15 September 2015 by Council Decision 2015/432/CFSP of 13 March 2015) and sanctions targeting trade with and investments in Crimea and Sevastopol (extended until 16 June 2016 by Council decision 2015/959/CFSP of 19 June 2015).
The sanctions are binding for EU-incorporated companies and EU citizens and individuals, regardless the territory of their activities, as well as for third-country companies and citizens with respect to their activities in the EU. Therefore, the extension of the EU sanctions against Russia means that at least for the next few months European businesses will need to continue exercising an enhanced level of due diligence in their transactions in Russia or with Russian partners.
Similarly, Russian companies and individuals listed in the EU sanctions regulations or active in the sectors targeted by the EU sanctions will continue facing certain restrictions in concluding business transactions with European counterparts and attracting financing for such transactions, and will need to undertake careful legal checks to ensure the compliance of their business activities involving EU persons (both internally and as business partners) with EU sanctions regulations.
Future developments in the EU sanctions against Russia will largely depend on the situation on the ground in Eastern Ukraine and the progress of related political negotiations between the leadership of Russia, Ukraine, and the EU (and especially Germany and France).