The fight against the intentional circumvention of the existing comprehensive range of restrictive measures is the primary objective of the 11th package of EU sanctions against Russia, which came into force on 24 June 2023. However, this package also encompasses additional expansions of pre-existing measures, some of which directly target Emirati companies. We outline below what, in our view, is most relevant to Emirati businesses involved in trade and collaboration with Russia directly or through Iran.

UAE designations

Two UAE-based air transportation firm (i Jet Global DMCC and Success Aviation Services FZC) are among individuals and entities targeted by the 11th package for their involvement in circumventing the EU’s restrictive measures by engaging in activities that frustrate the prohibitions. They were both designated by OFAC in November 2022 for facilitating the transfer of Iranian UAVs to Russia, in an action that OFAC indicated to have been taken in cooperation with the UAE government.

These companies are not blocked under Regulation (EU) No 269/2014, but are now subject to increased export restrictions for sensitive dual-use and advanced technology goods under Regulation (EU) No 833/2014. This generally means that they must clear with the competent authorities in the EU the sale, supply, transfer or export of dual use goods and technology, and listed goods and technology. The same requirement applies in case of the provision of related technical or financial assistance.

New anti-circumvention mechanism

A new mechanism is now available to the EU to limit the sale and export of specific sanctioned goods and technology to third countries that are “demonstrated to be at a continuing and particularly high risk of being used for circumvention” to benefit Russia. It is restricted to “sensitive dual-use goods and technology, or goods and technology that might contribute to the enhancement of Russia’s military, technological or industrial capacities or to the development of Russia’s defence and security sector, in a way that strengthens its ability to wage war, and whose export to Russia is prohibited under Regulation (EU) No 833/2014”. The relevant goods and technology will need to be listed in Annex XXXIII to Regulation (EU) No 833/2014, which is blank as of writing.

This is in response to the EU observing that exports of prohibited goods and technology to Russia via third countries have undermined the effectiveness of existing measures. Sensitive goods and technology continue to be sold to Russia not only through Russia’s neighbouring countries, but also other countries including the United Arab Emirates (and other Middle East countries, e.g. Iran and Syria).

No third country has yet been put on the country blacklist. An ‘eligible’ third country must have systematically and persistently failed to prevent circumvention of sanctions.

Export restrictions targeting third countries will also require unanimous agreement among all 27 EU member states. They will be implemented as a last resort measure when other individual measures and outreach to concerned third countries have proven inadequate. Importantly, adopting such restrictions should be “proportionate and solely aimed at depriving Russia of the resources which allow it to pursue its war of aggression against Ukraine”.

To step up its fight against the circumvention of restrictive measures, the EU will also strengthen the sharing of information regarding the implementation and enforcement of export limitations on sensitive items as well as the provision of forbidden services.

Additional restrictions in relation to specific goods and technology

Third-country companies importing listed advanced technology items and listed goods for use in aviation or the spacy industry from the EU need to take into account the ban on the transit if such items and goods through Russian territory (unless a derogation applies). The objective is to hinder Russia’s ability to domestically produce goods that are subject to sanctions. Although it is not explicitly stated whether this prohibition entails the termination of existing agreements, new sales or licensing contracts cannot be concluded.

Steel product manufacturers from third countries will need to prove the origin of iron and steel products used to process goods imported in the EU. Depending on the listed products, the prohibition applies from 30 September 2023, 1 April 2024 or 1 October 2024.

Prohibitions relating to sanctioned luxury goods have been expanded to include the provision of technical assistance, brokering services and other services as well as financing and financial assistance related to such goods.

Oil sector

All vessels, irrespective of their flag of registration, engaged in ship-to-ship transfers reasonably suspected of breaching the ban on importing Russian crude oil and petroleum products into the EU or the G7 Coalition price cap are banned from accessing EU ports and locks. Such vessels are under an obligation to notify the competent authority at least 48 hours in advance about a ship-to-ship transfer occurring within specific geographical areas. If a vessel does not comply with this requirement, it will be prohibited from accessing EU ports and locks.

If competent authorities reasonably suspects that vessels transporting Russian oil subject to the import ban or price cap are illegally interfering with, switching off or otherwise disabling their navigation tracking systems, such vessels will be banned from accessing EU ports and locks. This ban applies to “all vessels, irrespective of their flag of registration, and for any illegal interference with the navigation system at any point during the voyage to a Member State’s ports or locks”. The competent authorities will assess the situation based on a risk analysis “to evaluate whether there are sufficient factual circumstances to suspect a breach”. Breaches of any applicable requirements should be taken into account when conducting this analysis.

Comments

The latest sanctions package has significantly expanded the EU sanctions regime.

In light of the newly introduced anti-circumvention mechanism outlined above, third-country exporters should bear in mind the broadening by the EU of the range of goods and technology now subject to specific limitations in various categories. These restrictions encompass goods and technology that have the potential to advance Russia’s defence and security sector technologically. Similarly, such exporters should note the prohibition on the sale, licence or transfer of IP rights and trade secrets used in connection with restricted goods.

As for the new anti-circumvention mechanism, it seems that adding any third country is unlikely to be an unexpected move. Careful monitoring of the diplomatic relations between the UAE and the EU should allow getting early notice of signs that the EU may be considering adding the country to the blacklist. And, if the EU decides to use this mechanism, effects should be rather targeted in scope based on the current wording.

This information is provided for general information purposes only and does not constitute legal or professional advice. If you would like specific advice, please contact us.