Do the sanctions against Russia have an effect?
While the EU Commission assumes that the EU sanctions against Russia have “severely limited” the Federation’s political and economic options and thus demonstrated to be effective, it is known that the restrictions have been circumvented so far. For example, since March 2022, Western states have exported goods worth billions of euros to Russia via third countries. These states include, inter alia, China, Armenia and Kazakhstan.
Does Switzerland have sanctions against Russia?
Switzerland has adopted the European Union’s sanctions against Russia with the aim of increasing their impact. The problem of circumventing Russia sanctions has been recognized not only by the German Federal Ministry for Economic Affairs and Climate Protection as well as officials of EU institutions. The Swiss State Secretariat for Economic Affairs (SECO) also wants to counter this risk.
To that end, it published a new Red Flag Checklist on the sanctions on May 24, 2023, which is in particular intended to counter the economic circumvention structures. From now on, for example, transactions involving arms or dual-use goods with companies established after February 24, 2022 and domiciled in a non-GECC country will be considered suspicious.
The close cooperation between Switzerland and the EU with regard to the sanctions against Russia are also emphasized by the fact that Switzerland has now been included as a partner country in the Russia Embargo Regulation.
How is the eleventh package of sanctions supposed to better enforce the sanctions?
In order to better enforce the European sanction measures’ implementation, the European Commission adopted its eleventh package of sanctions on the Russia Embargo Regulation on June 23, 2023. This package, too, focuses on preventing circumvention transactions.
The package’s core element is a new instrument to combat circumvention practices. It envisages a tiered approach in dealing with third countries through which the Russia sanctions are circumvented. In a first step, the instrument envisages an enhanced diplomatic cooperation in order to prevent the sanctions’ circumvention. To that end, the EU Sanctions Representative is already in contact with the relevant countries.
Furthermore, companies being involved in a circumvention of the sanctions will be listed. Thus, they will be subject to stricter export restrictions. Now, this also affects, among others, three Hong Kong-based Chinese companies. If the situation cannot be improved by diplomatic efforts and individual measures, further measures can be taken. The last resort is an export ban on critical goods to third countries if there is a high risk of circumvention of Russia sanctions in such countries’ jurisdiction. Currently, this does not affect any countries.
In addition, the Commission has published lists of goods with a particularly high risk of circumventions. These goods do not extend the existing lists of sanctions but include already sanctioned goods the export of which is particularly monitored by the customs and enforcement authorities.
Besides economically critical goods, the lists also comprise goods which were found in Russian military systems on the battlefield in Ukraine. In connection with such goods’ export into third countries, exporting companies must apply particularly high due diligence standards.
To which sensitive goods has the transit ban been extended?
In order to further mitigate the risk of circumventions, the transit ban has been extended to sensitive goods.
The list now includes:
- Goods and technologies which may contribute to Russia’s military or technological strengthening or to the development of its defense and security sector
- Goods and technologies being suitable for use in the aerospace industry
- Jet fuels and fuel derivatives
Restriction in connection with intellectual property
In order to prevent listed goods from simply being produced in third countries, the sale, licensing, transfer and disclosure of certain intellectual property rights and of trade and business secrets has been prohibited as well.
Iron and steel products
The import restrictions on iron and steel products have been tightened as well. Importers are now required to provide proof of the country of origin of precursors used which were necessary for their iron and steel products’ processing.
These measures are accompanied by transport-related restrictions. Goods being towed by trailers and semitrailers registered in Russia must no longer be transported to the EU. This is intended to prevent Russian road haulers from circumventing the transport ban. Access to ports and locks within EU territory is being prohibited for vessels suspected of violating the Russian oil import ban or the G7 price cap. Such prohibition also applies to vessels illegally manipulating or switching off their navigation monitoring system when transporting Russian oil subject to the restrictions. Vessels engaged in transshipment operations in certain maritime zones must give at least 48 hours’ notice, otherwise they will not be granted port access either.
Furthermore, the already imposed oil import and export bans have been amended. The list of sanctioned goods, also luxury goods and persons, has finally been extended. In addition, it is now prohibited to provide technical support, brokering or other services, financial funds or financial aid in connection with luxury goods. The restrictions in connection with intellectual property also apply to these goods. Thus, a previously existing loophole has now been closed.
Following these European packages of measures, exporting and importing companies, as well as freight forwarders, must continue to exercise caution when trading goods with business partners from critical third countries. Business partners should be carefully screened, and the red flags should be strictly observed. Since exporters must continuously observe applicable prohibitions and restrictions, it is imperative that the company’s internal compliance programs be adapted to the new regulations.