1. New sanctions designations
Firstly, the EU agreed to add 14 individuals and 41 entities to the sanctions list, bringing the total number of individual listings to over 2,500. For the first time the listings include the captain of a shadow fleet vessel and a private operator of an international flag registry. The listings also include one entity in the Russian LNG sector, individuals involved in Russia's "military education" of Ukrainian children and a prominent Russian propagandist.
2. Targeting the energy sector, including the Russian Shadow Fleet
Secondly, the 18th sanctions package increases the restrictive measures against the Russian energy sector, building up on previous sanctions packages (see previous blog post on the 17th sanctions package here).
The EU is lowering the price cap for crude oil from USD 60 to USD 47.60, aligning it with current global oil prices. The EU is also introducing an automatic and dynamic mechanism modifying the oil price cap to ensure its effectiveness. Moreover, the EU decided to end the exemption for Russian oil imports to the Czech Republic. This is further reducing Russia's oil revenues which still account for about one-third of its government income.
The package further targets the Russian so-called "shadow-fleet". The "shadow-fleet" refers to non-EU ships, accused of circumventing the oil price cap by transporting and supplying Russian crude oil, and other transport restrictions, as they often operate under opaque ownership structures, use flags of convenience and obscure location data. The EU now includes an additional 105 vessels, that will be subject to a port access ban and a ban on the provision of a broad range of services related to maritime transport, bringing the total number of listed vessels to 444.
Russian and international companies, managing shadow fleet vessels, traders of Russian crude oil and a major customer of the shadow fleet are targeted with asset freezes, travel bans and bans on providing resources.
Furthermore, the EU introduces a ban on refined petroleum products made from Russian crude oil, that come from any third country, expect for Canada, Norway, Switzerland, the United Kingdom and the United States. The ban prevents Russia's crude oil from entering the EU market indirectly and thus closes loopholes.
The EU also imposes a full transaction ban on Nord Stream 1 and 2, including the provision of goods or services, with a view to prevent the completion, maintenance and future operation of these pipelines.
3. Targeting the banking sector
Thirdly, the EU is upgrading its existing measures against the Russian banking sector. A total of 22 Russian banks currently banned from using the of EU-based specialized financial messaging services, such as SWIFT, are subjected to a full transaction ban, bringing the total number of Russian and Belorussian banks in scope of the full transaction ban to 45.
The EU is also lowering the threshold to target financial actors in third countries that facilitate sanction circumvention or are connected to the System for Transfer of Financial Messages (SPFS), the Russian alternative to SWIFT.
Moreover, the EU is expanding the transaction ban on third countries' financial actors, that facilitate sanction circumvention.
It is also imposing a ban on carrying out transactions with the Russian Direct Investment Fund (RDIF) and its subsidiaries as well as other related financial service providers, limiting Russia's access to financing for economic modernization and industrial projects.
Additionally, a new ban targets the sale, supply, transfer and export of software management systems and software used in the banking and financial sector.
4. Military sector
Fourthly, the Military industry is subject to more and stricter sanctions, as a result of individual listings of persons and entities, including from China and Belarus. Restrictions on the sale, supply, export and transfer of specific dual-use items and technologies are introduced worth EUR 2.5 billion and including items such as including computer numerical control (CNC) machines and constituent chemicals for propellants. Moreover additional export restrictions for sensitive dual use items and technologies are introduced with respect to another 26, some of which are located in third countries, found to support the Russian military or military industry.
5. Measures impacting international investor state arbitration
The 18th EU Russia Sanctions package also comes with additional measures to protect EU Member States and EU companies from investor-state arbitral proceedings on the basis of bilateral investment treaties (BITs) concluded with Russia. The measures will allow EU Member States to recover damages, encompass an obligation to not recognize arbitration proceedings based on claims brought on the basis of a compliance with EU Russia sanctions and an obligation for EU Member States to act in BIT arbitration proceedings.
6. What's next?
The EU is the first jurisdiction to move ahead with a new comprehensive sanctions package, suggesting that other states that have imposed sanctions against Russia for the invasion of Ukraine may follow suit.
