This represents the most far-reaching restrictions yet imposed on Russia's energy sector. The package includes a blanket ban on Russian LNG, robust measures against financial infrastructure, including cryptocurrency, and rigorous anti-circumvention measures aimed at third-country facilitators. These measures significantly intensify pressure Russia’s war economy and clamp down on those seeking to evade EU sanctions.
In this blog we provide you with an overview of significant changes and examine the necessary steps businesses must take to ensure compliance.
What is new?
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#1 Energy sector sanctions: LNG ban, vessel restrictions, and scrapping of exemptions
- All purchases, imports and transfer of Russian liquefied natural gas are now forbidden for long-term contracts, and within six months for short-term contracts. This measure is set to apply from 1 January 2027. Notably, the previous exemption for Rosneft's and Gazprom Neft's oil and gas imports into the EU has been scrapped. However, imports of oil from third countries such as Kazakhstan, as well as the transport of oil to third countries in line with the Oil Price Cap, are still permitted.
- An additional 117 vessels have been designated, rendering them subject to port access bans and restrictions on maritime transport services. Additionally, a prohibition on the reinsurance of vessels associated with the shadow fleet has been implemented.
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#2 Financial sector: Further sanctions and rules on Russian and allied banks
- Five Russian banks – Istina, Zemsky Bank, Commercial Bank, Absolut Bank, MTS Bank, and Alfa-Bank – now face transaction ban, meaning EU operators are no longer permitted to do business with them. On top of that, the EU has slapped transaction bans on five banks from Central Asia, as well as four banks from Belarus and Kazakhstan.
- The EU has also banned the use of the rouble-backed stablecoin A7A5, with EU barred from offering crypto and certain fintech services that would help Russia build its own financial infrastructure.
- Furthermore, EU operators are forbidden from conducting transactions via Russia's Mir payment card system or its SBP fast payments infrastructure.
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#3 Trade and export controls: Strict compliance needed for supply chains
- The EU has now broadened its export ban to include electronic components, rangefinders, chemicals used for making propellants, metals, oxides and alloys essential for manufacturing military systems, salts and ores, articles made of rubber, construction materials, and a range of other goods.
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#4 Russian government and services: Authorisation required
- Any organisation wishing to supply services to the Russian government must now secure prior authorisation. The provision of AI services, high-performance computing services and commercial space-based services to Russian entities is now restricted.
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#5 Anti-circumvention measures: EU tightens global export controls
- The package takes direct aim at third-country entities facilitating Russia's ability to circumvent existing sanctions and sustain its military operations. 45 new entities have been designated for providing direct or indirect support to Russia's military industrial complex or enabling the circumvention of export restrictions on critical technologies such as computer numerical control machine tools, microelectronics and unmanned aerial vehicles.
- Significantly, 17 of these entities are located outside Russia, demonstrating the EU's willingness to pursue sanctions circumvention across global supply chains. This includes 12 entities in China and Hong Kong, 3 in India and 2 in Thailand. These entities will face tighter export restrictions on dual-use goods and items which might contribute to the technological enhancement of Russia's defence sector.
Special economic zones
The EU has clamped down hard on economic ties with businesses active in nine designated Russian special economic zones. Companies are now barred from entering new contracts with any organisation based in these SEZs. Notably, the restrictions go a step further for Alabuga and Technopolis Moscow, where the ban extends to existing contracts, essentially forcing divestment.
How does this affect your business?
If you operate within the impacted sectors, you must act without delay to assess your compliance position to avoid a breach of the EU sanction regime. It is crucial to realise that these latest measures directly apply to certain business outside Russia as well.
We recommend taking the following steps:
- Review and strengthen due diligence: Audit your counterparties, suppliers and customers to identify sanctions exposure and potential circumvention risks. Enhance your due diligence procedures for third-country entities, particularly given the extraterritorial reach of this package.
- Assess your contracts: Identify agreements that may be affected by the new designations and prohibitions. Evaluate your supply chain exposure and develop transition plans for arrangements requiring modification or termination.
- Review service provision: Identify services that may require prior authorisation under the new measures. Assess whether your services fall within prohibited categories and cease provision where necessary.
- Monitor further developments: The European Union remains ready to adopt further sanctions. Establish procedures to track regulatory changes and adapt your compliance programmes accordingly.
Companies should review their internal compliance procedures promptly and implement necessary changes to avoid disruptions or penalties. The extraterritorial reach of this package demonstrates the EU's commitment to closing circumvention loopholes and demands enhanced vigilance across global supply chains.
How we can help
If you have questions regarding the impact of these new sanctions on your business, or need tailored guidance on export licensing, customs compliance or sanctions matters, please do not hesitate to contact us or any member of our Corporate Crime & Business Integrity team.
