On 18 December, the EU announced their 12th round of sanctions targeting Russia. This comes against the backdrop of a flurry of Russia sanctions related activity; namely, widely reported price cap investigations by the G7; release of the U.S. updated quint-seal guidance on maritime sanctions compliance; and a number of designations of third country actors believed to be engaged in price-cap circumvention.
In coordination with the EU, the UK and the U.S. have also updated their respective Oil Price Cap Guidance, materially altering the attestation model adopted to date. It is anticipated that the U.S. will follow, shortly.
The full text of the EU 12th Package can be found here, the updated Oil Price Cap Guidance for the UK can be found here, and the updated Oil Price Cap Guidance for the U.S. can be found here. The main takeaways are as follows:
Increased Monitoring of the Price Cap
A key focus of the EU and wider G7 remains the combatting of perceived attempted circumvention of the G7 Price Cap on Russian oil. In order to facilitate compliance with the price cap and increase the barriers to the falsification of attestations and in lock-step with the UK, they have introduced a requirement that itemized price information for ancillary costs, such as insurance and freight, be shared upon request throughout the supply chain of Russian oil trade.
The EU is yet to identify how this new attestation process will work in practice, but it appears to envisage a mechanism wherein the actors who have access to itemized price information will be required to share this with actors down the supply chain who do not have access to this information. In turn, this will enable the competent Member State authorities to request proof of adherence to the price cap regime from all the actors involved in the event of a suspected breach.
The UK has provided more specific guidance, through the interim update of their Oil Price Cap Guidance. This envisages a new category of Tier 3a service providers, a per voyage attestation model, and itemized ancillary costs to be recorded by Tier 1 entities and provided by Tier 2 and Tier 3a contractual counterparties upon request.
The U.S. has provided similar guidance. However, in the U.S. all Tier 3 service providers will now also be required to provide one attestation per voyage. The updated guidance also states that it is the Tier 2 and Tier 3 actors’ counterparties’ responsibility to provide such attestation “within 30 days of lifting or loading Russian oil or Russian petroleum products.
Similar to the EU and the UK, Tier 3 actors may now also require counterparties to share additional information upon request “including itemized ancillary costs such as freight and insurance costs.” The guidance states that “[e]xamples of triggers for requests for additional information (including ancillary cost information) include if a Tier 3 Actor becomes suspicious about a possible violation in the course of their own due diligence or if a Tier 3 Actor receives information about a suspected violation (i.e., from open source reporting or a request from relevant authorities).”
New Prohibition on EU Persons selling tanker for use in Russia and an accompanying reporting requirements
A new Article 3q has been introduced. This reinforces the prohibition on EU persons from selling or otherwise transferring ownership in tankers to Russian persons or for use in Russia (unless an authorization is obtained). Furthermore, Article 3q(3) and 3g(4) introduce two relevant reporting requirements. These are prospective and retrospective in nature and apply in relation to sales of tankers to any third country where:
- Going forward, any sale or transfer of tankers by EU persons to a third country must be notified to the Member State, where the owner of the tanker is a citizen.
- Any sale or transfer of tankers by EU persons to a third country (including Russia) from the period 5 December 2022 until 10 December 2023 must also be reported by 20 February 2024.
In both cases, the notification to the competent authority is required to contain the identities of the seller and the purchaser, incorporation documents, the IMO number and call-sign of the tanker.
Expanded Import and Export Bans
Additionally, the following new import and export bans have been introduced:
- The list of items which are prohibited from import into the EU, has been expanded to include metal goods such as (pig iron and spiegeleisen, ferro-alloys, copper wires, aluminum wires, foil, tubes and pipes) as well as Liquified Petroleum Gas. This is coupled with wind-down exemptions that permit the execution of contracts concluded before 19 December 2023 until 20 March 2024 for the majority of the metal goods, and until 20 December 2024 for LPG.
- Import ban on Russian diamonds. This is part of a coordinated G7 diamond ban starting on 1 January 2024. In addition, as of 1 March 2024, a ban on Russian diamonds polished in a third country will take effect and the ban will be finally expanded to include lab-grown diamonds, jewelry, and watches containing diamonds as of 1 September 2024.
- New export controls on dual use/advanced tech, EU industrial goods, as well as the provision of software for the management of enterprises and software for industrial design and manufacture.
Lastly, a new notification requirement has been introduced in relation to the transfer of funds exceeding 100,000 EUR outside the EU by any entity established in the EU that is owned or controlled by an entity established in Russia, or by a Russian national or resident.
Over 140 new entities and individuals have been added to the list of those who are subject to asset freezing measures, most notably major insurance company AlfaStrakhovanie Group a.k.a. Alfa Insurance. Furthermore, a new listing criterion was added where the EU will now also impose asset freezes on persons who benefit from the forced transfer of ownership or control over Russian subsidiaries of EU companies.
Should you have any further questions about these new restrictions, please reach out to the Reed Smith Team below.