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Published on: 5 January 2024

Russia sanctions expansion

Business has traditionally been good in the import/export sector. Profitability is still in good shape today. In the last few years, however, things have become much more complicated in a short period of time. With the outbreak of war in Ukraine, trade with Russia is strongly discouraged through sanctions legislation. Indirect trade, re-export to Russia, is also opposed.

At the beginning of 2024, the 12th EU sanctions package entered into force. In this article, I will briefly explain the main additional measures taken by the EU.

Diamonds are targeted

Russia is the world’s largest producer of diamonds. At the initiative of the G7, the EU is now banning the direct or indirect import, purchase or transfer of diamonds coming from Russia. This ban applies not only to diamonds originating in Russia, but also to those exported from Russia, in transit, whether processed in Russia or in a third country.

The ban on the import of non-industrial natural and synthetic diamonds and diamond jewellery will apply as of Jan. 1, 2024. The indirect import ban on diamonds cut outside Russia and/or incorporated into (non-Russian) jewellery will be phased in from March 1, 2024. The gradual introduction of indirect import bans is to give the authorities and the market time to set up a system to trace the origin of diamonds.

The mandatory “No-Russia clause”

Part of the 12th tranche of sanctions is also that certain EU exporters will have to adjust all their contracts. They will have to add a clause to their contracts with buyers that prohibits them from using the goods for re-export to Russia and re-export for use in Russia of particularly sensitive goods and technology.

The duty to include the clause applies to exporters of prohibited goods used in Russian military systems or critical to the development, production or use of those Russian military systems, as well as to aviation goods and weapons.

Controls and restrictions on imports and exports

The list of goods banned from export to Russia is expanded to include chemicals, lithium batteries, thermostats, DC motors and servo motors for unmanned aerial vehicles (UAV), machine tools and machine parts.

In addition, the EU introduced further restrictions on imports of goods that bring Russia significant revenues. Examples include pig iron, mirror iron, copper wire, aluminium wire foil, pipes and tubes.

 Anti-avoidance measures, financial rules to be tightened

The EU has introduced tighter rules to combat circumvention. The transit ban that currently applies to so-called dual-use goods and technologies exported from the EU via Russia to third countries will be extended to all goods that can be used in war.

To further limit circumvention of the financial embargo, Russian nationals will be prohibited from owning, controlling or holding positions in the governing bodies of the legal persons, entities or bodies providing crypto asset wallet, account or custody services to Russian individuals and residents.

It also extends the existing ban on providing services to providing access to enterprise management software and industrial design and manufacturing software.

In addition, a notification requirement will be introduced for taking cash outside the EU by an EU-based entity owned or controlled by an entity based in Russia or by a Russian citizen or natural person resident in Russia.

Export/import? Examine whether you comply!

Certainly, before exporting goods to, or importing them from, Russia, legal research into whether it is allowed under the sanctions regime is indispensable. However, the new rules are broader. The EU has taken steps to curb circumvention of sanctions through third (other) countries. Trade with Russia’s trading partners such as Kazakhstan and India are also under a magnifying glass, but actually for any import/export company it is essential to have clarity on this topic. Various financial and software companies also need to pay attention to who they trade with.

Do you import or export goods with relevance to sanctions measures? Then contact one of our lawyers by mail, telephone or fill in the contact form for a free initial consultation. We will be happy to think along with you.

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