May 6, 2022
EU imposes sanctions in response to war in Ukraine
In response to the war in Ukraine, the European Union (EU) has adopted sanctions against Russia. The first measures were issued on 23 February 2022, with further measures following, and the latest measures issued on 12 April 2022.
First package of sanctions
The sanctions adopted in the first stage on 23 February 2022 include:
Over 330 members of the Russian Parliament involved in the recognition of the self-proclaimed "Luhansk and Donetsk People's Republics" in eastern Ukraine have been added to the EU sanctions list. It also listed 26 individuals and entities that are considered to be assisting in undermining Ukraine's territorial integrity, sovereignty and independence. In addition to high-ranking representatives of the Russian military and media, this includes three Russian banks and some of their representatives. The sanctions include, among other things, an absolute ban on transactions with the designated persons and companies and that may also have an impact on companies they are involved in.
Regional economic embargo
An economic embargo with far-reaching trade, investment and import restrictions was also imposed on the areas of Donetsk and Luhansk oblasts not controlled by the Ukrainian Government. Certain exceptions for current transactions are possible but require a careful case-by-case examination. The measures are similar to the embargo on the Crimea region, which has been in force since 2014.
A sectoral ban on the financing of the Russian Federation, its government and its central bank was also introduced. The aim of this measure is to restrict the access of the Russian State and Government to the capital and financial markets and related services in the EU.
Second sanctions package
On 25 February 2022, a second package of sanctions was adopted by the EU, which contains the following core elements:
Tightening of export controls
The export of dual-use goods (i.e., goods listed on the EU export list) and the provision of related services from the EU to Russia is prohibited. Narrow exceptions apply to certain humanitarian or security-related transactions where certain information must be included in the export declaration and where there is an obligation to report to the competent export control authority. Exceptions, which must be carefully examined for their conditions, also apply to the supply on the basis of contracts already concluded and to exports to Russian subsidiaries of EU companies. A detailed exchange of information and consultation procedure between export control authorities in the EU is required.
For trade with Russia, specific additional lists of restricted goods and related services have been drawn up, which are also provided with narrow exceptions and are outlined below:
Restrictions on financing
Third sanctions package
On 1 March 2022, a third EU sanctions package came into force with the following provisions:
On 9 March 2022, the EU again extended the sanctions and export controls against Russia. The restrictions on transferable securities now also apply to crypto assets.
A new annex with prohibited maritime goods and technologies was also created. In addition, services related to these goods are prohibited. There are narrow exceptions for humanitarian purposes or for maritime security. In addition, 160 people have been added to the EU sanctions list.
It is important to note that there have been various corrections made to the sanction regulations issued to date.
Fourth sanctions package
Further sanctions and export controls were issued by the EU on 15 March 2022 such as an export ban on luxury goods to Russia, an investment ban on oil exploration and oil production as well as an import ban on Russian key goods in the iron and steel sector. In addition, business with 12 Russian companies and their holdings outside the EU was prohibited. These are companies from the energy, shipping, and aviation industries and companies that are active in both the civil and military sectors. These sanctions are coordinated within the G7 countries.
Fifth sanctions package
Further sanctions were issued on 8 April 2022:
Sixth sanctions package proposed
On 4 May 2022, the European Commission proposed a new package of sanctions that will include a phase out of Russian crude imports within six months, of refined products by the end of the year and sanctions on war crime suspects.In addition, the President of the Commission announced the addition of more individuals who committed war crimes to the sanctions list. It was also announced that Russia’s largest bank Sberbank along with two other Russian banks will be excluded from the SWIFT network.
To ensure compliance with the new export control and sanctions rules, companies should take the following measures in the short term:
For additional information with respect to this Alert, please contact the following:
Ernst & Young GmbH, Indirect Tax Services, Eschborn
Ernst & Young AG, Indirect Tax Services, Geneva