EU greenlights 11th Russia sanctions package, mostly targeted at stuffing loopholes

After weeks of wrangling, EU ambassadors on Wednesday (21 June) agreed to an 11th package of sanctions against Russia over its invasion of Ukraine, designed to prevent third countries and companies from circumventing the bloc’s existing measures.

The biggest novelty in the hard-fought-for package, according to EU diplomats, was enabling restrictions on the sale of sensitive dual-use goods and technology to third countries that might sell it to Russia.

Names of such countries can now be added to an annex of the EU sanctions regulation with the unanimous agreement of all 27 member states.

The new package also prohibits transit of an expanded list of goods and technology via Russia which might aid the Kremlin’s military or security sector.

EU officials have long been concerned about a surge of demand for products originating in Europe from Russia’s neighbours like Armenia, Kazakhstan or Kyrgyzstan and from the United Arab Emirates, Turkey or China.

However, several EU diplomats pointed out the mechanism was severely weakened during negotiations on the package that it may become “almost impossible to activate”.

Several EU member states, including Germany, raised concerns over the past weeks that such a mechanism would hurt diplomatic relations with third countries, or even bring them closer to the Kremlin.

These concerns were mitigated by the addition of more safeguards to the sanctions framework, including a promise to Berlin that the EU’s restrictive measures would not end up amounting to secondary sanctions in the future.

Secondary sanctions impose penalties on persons and organisations not subject to the sanctioning country’s legal jurisdiction, a practice largely used by the US. The EU does not have jurisdiction to impose such measures of the type that the US Office of Foreign Assets Control (OFAC) in the US Department of the Treasury frequently uses.

To convince sceptics, a draft statement was circulated ahead of Wednesday’s meeting, setting out a specific procedure for sanctioning third countries.

“These steps may include diplomatic outreach, strengthening bilateral and multilateral cooperation, and targeted technical assistance to the third country in question,” a draft version of the statement, shown to EURACTIV, read.

The new set of EU restrictive measures now also formally closes the northern branch of the Druzhba oil pipeline leading to Poland and Germany for Russian oil.

However, the route will still be able to import oil from Kazakhstan.

Greece, Hungary drop objections

Beyond targeting third countries, the package adds a further 71 persons and 33 entities to those banned from the EU and with their assets in the bloc frozen for their involvement in the illegal deportation of Ukrainian children to Russia.

The deal, in the making since April, had been held up by objections from Hungary and Greece over the listing by Ukraine of some of their companies as sponsors of war because they did business with Russia or in other ways contributed to Moscow’s war effort.

Ukraine overnight had removed the five Greek shipping firms from its list, securing the backing of Athens for the package, EU diplomats said.

Hungary, meanwhile, backed the new sanctions even though its OTP bank stayed on the Ukrainian list.

Budapest said it would return to the issue when the EU discusses the new tranche of money for Ukraine from the European Peace Facility (EPF), which it also had blocked for weeks, EU diplomats said, adding the issue could be discussed this Friday.

Another controversial issue, which held up Germany’s backing, was the inclusion in the draft of the names of eight Chinese companies, which the EU believes were selling Russian goods that could help its war.

The names were leaked in early May and since then, after high-level contacts between the European Commission and China, Beijing made a commitment to put pressure on these companies to stop their activities.

As a result, five were taken off the list after Beijing vows to stop the flow of military goods to Russia, South China Morning Post first reported last week.

Three remaining businesses, registered in Hong Kong and little known, are Russian entities operating in China and will remain on the list.

[Edited by Nathalie Weatherald]

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