New EU sanctions against Russia: what companies should keep in mind now

Sven PohlLaw

The EU has announced a comprehensive tightening of the existing sanctions against Russia – with far-reaching implications for German companies as well. They should now carefully examine the extent to which their existing or planned business relationships with Russia and Ukraine are affected by the EU sanctions. Under certain circumstances, even the initiation of negotiations could be punishable.

In this context, the EU draft provides for a ban on trading in Russian government bonds, which is supposed to impede the Russian state’s refinancing. Several hundred individuals and Russian companies are to be placed on a sanctions list: From now on, no economic resources may be made available to them.

Which sanctions already exist - which will be added?

Far-reaching economic sanctions have already been in place against Russia since the annexation of Crimea in 2014. For example, an arms embargo has been imposed on Russia, according to which the export of military goods to Russia is prohibited. This also has an impact on dual-use goods or other goods if these are intended for military use. The goods designated in Regulation (EU) No. 883/2014, Annex II, require an export license. These include goods from the energy sector, in particular goods needed for oil exploration and production.

Personal sanctions have been imposed on 185 individuals and 48 organizations since 2014, which includes the freezing of assets, bans on entry into the EU, and prohibitions on providing economic resources to these individuals and organizations.

In addition, the EU had imposed import as well as export bans on trade in goods with Crimea and Sevastopol. There is also a ban on the provision of services in connection with infrastructure projects in Crimea and Sevastopol.

Even the initiation of contract negotiations could be punishable by law

We recommend that companies carefully review their existing or planned business relationships with Russia and Ukraine in order to determine whether they are affected by the existing or the expansion of sanctions.

Depending on the new sanctions’ form, it cannot be ruled out that the conclusion of a contract or even the commencement of contract negotiations will be prohibited or subject to prior approval, so that the restriction under export control law will not only take effect when the goods are delivered.

Entrepreneurs and companies should bear in mind that an export control violation can constitute a criminal offense punishable by up to 15 years imprisonment.

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