Sanctions issued following the two-year anniversary of the invasion

This includes additional designations from the EU, UK and US as well as further requirements with respect to the price cap regime and the efforts to tackle circumvention. We also include highlights from recent guidance issued from the EU, US and UK.  

EU's 13th package of sanctions and Guidance on Due Diligence 

On 23 February 2024, the EU announced the adoption of its 13th package of sanctions against Russia, marking the two-year anniversary of the Russian full-scale invasion of Ukraine on 24 February. The press release from the Council of the European Union can be found here, and the one from the EU Commission here.

According to the EU's High Representative for Foreign Affairs and Security Policy, Josep Borrell, the EU is "further tightening the restrictive measures against Russia's military and defence sector, targeting further entities in third countries who supply equipment as well as those responsible for the illegal deportation and military re-education of Ukrainian children." 

In brief, the new package includes the following key measures: 

• The designation of an additional 106 individuals and 88 entities on the asset freeze list. The new designations target the military and defence sectors, members of the judiciary, local politicians and people responsible for the illegal deportation and military re-education of Ukrainian children; 
• The addition of 27 entities to the list of those directly supporting Russia's military and industrial complex (Annex IV of Council Regulation (EU) 833/2014), who will be subject to tighter export restrictions concerning dual use goods and technologies. This includes entities located in third countries involved in circumvention of trade restrictions (including China, India, Sri Lanka, Serbia, Kazakhstan, Thailand and Turkey), and Russian entities involved in the development, production and supply of electronic components for Russia's military and industrial complex;
• An expansion of the list of restricted items which could contribute to the technological enhancement of Russia's defence and security sector. The restricted items include components for the development and production of unmanned aerial vehicles (drones);
• Further restrictions on the export of goods which contribute to the enhancement of Russian industrial capabilities, such as electrical transformers and aluminium capacitors;
• Adding the United Kingdom to the list of partner countries (which already included Norway and Switzerland) which apply a set of restrictive measures on imports of iron and steel from Russia, and a set of import control measures that are substantially equivalent to those of the EU.

The new measures are published in the EU Journal. The updated trade restrictions can be found in Council Regulation (EU) 2024/745 amending Regulation (EU) 833/2014. The updated asset freeze list can be found in Council Implementing Regulation (EU) 2024/753 implementing Regulation (EU) 269/2014.

The background to the latest measures is, among other things, that Russia is consistently seeking to circumvent the sanctions imposed on it, and that the EU Commission is therefore evaluating the effectiveness of the measures in place, and seeking to address any potential loopholes. The EU Commission states in the press release that the focus is now on enforcement, targeting in particular the circumvention of EU sanctions via third countries. 

Following the issuance of the 13th package, on 19 February the EU also issued guidance for EU operators on implementing enhanced due diligence to shield against Russia sanctions circumvention. The guidance provides information on: 

1. Risk assessments to detect potential sanctions circumvention 
2. Enhanced due diligence 
3. Circumvention red flags related to business partners and customers 

The guidance also links to additional resources that may be useful when conducting due diligence. 

New designations in the UK and US

On 22 February 2024, in time for the two-year anniversary of the Russian full-scale invasion of Ukraine, the UK designated an additional 52 individuals and entities under the Russian financial sanctions regime. The US also announced its largest number of designations imposed since the Russian invasion of Ukraine. Like the EU, the UK and US also target sanctions circumvention and sanctions evasion. 

Among the 52 entities and individuals designated in the UK are entities based in Turkey, China, the United Arab Emirates, the Marshall Islands, and Switzerland, in addition to Russia based entities and individuals. The designated entities and individuals are represented in the Russian defence, electronics, energy, extractives and transport sectors. For further information on the new designations, see the full list of new designations in the UK in the OFSI notice. 

In the US, OFAC has, together with the US Department of State, designated more than 500 additional individuals, entities and vessels, and the US Department of Commerce has added 90 entities to the Entity List. The new measures target Russia's financial infrastructure, sanctions evaders in third countries (in Europe, East Asia, Central Asia, and the Middle East), actors involved in providing Russia with unmanned aerial vehicles (UAVs/drones) and Russia's military industrial base. OFAC's press release can be found here and more details on the new designations, including updated FAQs and general licences, can be found here. The US has also implemented sanctions against individuals in connection with the death of Alexey Navalny. 

In addition, the US government has issued a Business Advisory to assist companies in making informed decisions regarding the risks of conducting business in Russia. The Business Advisory includes information on risks relating to sanctions and export controls, as well as money laundering and corruption. The Business Advisory also includes comments on human rights due diligence, where businesses and individuals operating in Russia are advised to conduct heightened human rights due diligence in line with international standards. This guidance emphasises the importance of taking a holistic approach to compliance and offers useful practical guidance in that respect. 

New guidance with respect to the oil price cap measures 

As of 19 (UK and US) and 20 (EU) February 2024, new requirements entered into force regulating per-voyage price cap attestations, itemised price information for ancillary costs and notification requirements for tanker sales.

Per-voyage attestation requirements 

On 20 December 2023, the Price Cap Coalition published a statement which included certain revisions to the Price Cap regime. Where annual Price Cap attestations were previously accepted, the Price Cap Coalition requested in its statement that all Coalition service providers "receive attestations from their counterparties each time they lift or load Russian oil". 

Following the Price Cap Coalition's statement, relevant jurisdictions have published their own guidance on how service providers and other affected parties should adhere to the revised regime.

US guidance 

On 20 December 2023, OFAC issued a press release and updated its Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin (the "Price Cap Guidance"). According to the updated Price Cap Guidance, Tier 3 operators, and certain Tier 2 operators, must obtain customer attestations each time a counterparty loads or lifts Russian oil or Russian petroleum products. By way of example, OFAC notes that the attestation requirements apply when "calling at a port in the Russian Federation or performing a ship-to-ship transfer to load Russian oil or Russian petroleum products". The attestation must be obtained prior to or 30 days after the lifting or loading of Russian oil or Russian petroleum products, depending on the nature of the specific operator. By way of example, shipowners must obtain an attestation prior to the lifting or loading of Russian oil or petroleum products, whereas insurers must obtain attestations within 30 days of the lifting or loading of Russian oil or petroleum products. 

US service providers are expected to be in compliance with the updated requirements by 19 February 2024. 

UK guidance 

In December 2023, OFSI updated its Industry Guidance for the UK Maritime Services Ban and Oil Price Cap, in accordance with the Price Cap Coalition's statement. Further revisions were included in an update in February 2024. According to the updated Industry Guidance, the Tier 3 category is, as of 19 February 2024, split into Tier 3A and Tier 3B. The changes to the Price Cap regime applicable from 19 February 2024 will apply to Tier 1, 2, and 3A operators. Tier 3B operators include reinsurers, reinsurer brokers and financial institutions providing general financing facilities. 

In accordance with the Price Cap Coalition's statement, service providers must provide or obtain Price Cap compliance attestations on a per-voyage basis. The guidance also specifies that a ship-to-ship transfer will result in the transport being considered to be undertaken in two separate voyages, requiring two separate attestations. 

According to the updated guidance, the following additional attestation responsibilities apply to the various actors involved in the maritime transport of Russian oil or petroleum products as of 19 February 2024: 

• Tier 1 and Tier 2 operators will need to provide an attestation to any Tier 1 or Tier 2 (other Tier 2 counterparties only for Tier 2 operators) counterparty prior to the lifting or loading of Russian oil or petroleum products or the effective date of the contract (whichever is earlier), and additional attestations for every relevant voyage prior to the lifting or loading of Russian oil or petroleum products. Further, they must provide an attestation to any Tier 3A counterparty prior to the effective date of the contract, and additional attestations for every relevant voyage within 30 days of the lifting or loading of Russian oil or petroleum products. 
• Tier 3 operators will similarly need to obtain per-voyage attestations for all relevant voyages within 30 days of the lifting or loading of Russian oil or petroleum products. 

The general licence for the Price Cap regime can be found at this page. 

EU guidance 

On 26 January 2024, the EU Commission updated the consolidated FAQs to reflect the changes in the Price Cap regime. According to FAQ no. 35b, attestations must be obtained within 30 days of lifting or loading of Russian oil or petroleum products. According to the EU Commission, this means, by way of example, that "new attestations need to be provided each time a ship-to-ship transfer takes place to load Russian oil or Russian petroleum products during the transportation of cargo before it reaches its destination". The per-voyage attestations must be obtained in addition to the attestation obtained at the moment a contract is concluded, cf. FAQ no. 42. 

Similar to the UK, the EU will also split the Tier 3 operators into Tier 3A and 3B, where the latest requirements will not apply to Tier 3B operators. Tier 3B operators include reinsurers and reinsurance brokers. The specific requirements applicable within each category (Tier 1, 2 and 3A) are set out in FAQ no. 35 and further elaborated on in FAQs no. 36 (Tier 1 operators), no. 37 (Tier 2 operators), and no. 38 and no. 40 (Tier 3A operators). 

In the EU, the new requirements with respect to per-voyage attestations entered into force on 20 February 2024. 

Itemised price information for ancillary costs 

In addition to the per-voyage attestation requirements, the Price Cap Coalition also outlined additional requirements for operators "with access to itemised ancillary costs to share these upon request with entities further down the supply chain" in their 20 December 2023 statement, with subsequent guidance by the relevant jurisdictions. 

US guidance 

In their Price Cap Guidance, OFAC set out the requirements for US service providers with respect to ancillary cost information. Operators with access to price information, such as Tier 1 operators and certain Tier 2 operators, must maintain and retain itemised ancillary cost information as relevant for a given contract or transaction, and provide this information to relevant Tier 2 and Tier 3 operators as necessary and upon request, and relevant Tier 2 and Tier 3 operators must similarly request such information. Ancillary costs include for example shipping, insurance and freight costs. 

The new US requirements with respect to itemised price information for ancillary costs must be complied with by 19 February 2024. 

UK guidance 

Similarly, OFSI's updated Industry Guidance stipulates that itemised ancillary costs must be recorded by Tier 1 operators and Tier 2 operators with access to price information, and provided to Tier 2 or Tier 3A operators within 30 days upon request. 

For cost, insurance and freight ("CIF") contracts, ancillary costs includes costs such as export licences, inspection, shipping fees, packaging etc., insurance, freight and any other relevant costs. For free on board ("FOB") contracts, ancillary costs include "costs of packaging, any charges for loading the product onto transport and delivering the goods to the seller's port, export taxes, customs duty and costs, and any transfer, handling and loading charges associated with loading the product onto the ship". 

The new UK requirements with respect to itemised price information for ancillary costs entered into force on 19 February 2024. 

EU guidance 

According to the updated EU Commission's FAQs, itemised price information for ancillary costs must be shared upon request throughout the supply chain of Russian oil trade. The price information must be shared by operators with access to price information, such as Tier 1 operators and in some instances Tier 2 operators. Operators without access to price information, such as Tier 3 operators, must collect this information from their counterparties with access to this information. The itemised ancillary costs information must be provided within 30 days of such a request being made. 

The EU operates with the same recommendations for CIF and FOB as OFSI (which is also briefly mentioned in OFAC's Price Cap Guidance). 

Similar to the per-voyage attestations, the new requirements regarding itemised price information for ancillary costs entered into force in the EU on the 20 February 2024. 

Notification requirement for tanker sales 

With the 12th package of sanctions against Russia, the EU introduced notification requirements for the sale of tankers for the transport of crude oil or petroleum products. According to Council Regulation (EU) 833/2014 article 3q (4) and (5), any sale or other arrangement entailing a transfer of ownership of tankers for the transport of crude oil or petroleum products by an EU person to any third country shall be notified immediately to the relevant competent authorities. The requirement applies retroactively, targeting tanker sales dating back to 5 December 2023, which EU persons were required to notify to the competent authorities by 20 February 2024. 

On 19 February 2024, the EU Commission updated their consolidated FAQs, which provide a more detailed understanding of the scope of application of the notification requirement. According to the Commission, the implementation of this requirement seeks to promote transparency in the sale of tankers, in particular second-hand carriers, which could potentially be utilised to circumvent the Price Cap regime, for example by facilitating the expansion of the so-called Russian "shadow-fleet".

According to the FAQs, the notification requirement is broad in scope in order to ensure thorough supervision of tanker sales to third countries. By way of example, "other arrangement entailing a transfer of ownership" includes not only the sale of tankers, but also "barter, relinquishment, inheritance, interests in a trust or other similar legal arrangement as well as any other sort of division of the ownership or transfer of title such as a corporate restructuring", meaning any arrangement which would cause a transfer of ownership of the vessel, cf. FAQ no. 2. On the other hand, the EU Commission clarified that the notification requirement does not apply to long-term charterparties, where the ownership does not change hands, cf. FAQ no. 12. 

Further, the EU Commission clarifies that the notification requirement, in addition to any EU person, also applies when an EU person owns a tanker through a third country company, cf. FAQ no. 3. The use of intermediaries also does not alleviate the EU person of its obligation to notify the competent authorities of the sale of tankers to third countries as this could be considered circumvention. 

The notification requirement should include specific information on at least the identities of both the seller and the purchaser, incorporation documents of both parties including shareholder structure and management, as well as the IMO and Call Sign of the tanker, cf. article 3q para. 4 and FAQ no. 5. The EU Commission advises all EU persons to submit all relevant documentation, including e.g. the SPA.  There is also a template for the notification of tanker sales published on the EU's website, as well as on the website of certain EU member states. 

Price Cap Coalition's Oil Price Cap Compliance and Enforcement Alert

On 1 February 2024, the Price Cap Coalition published an Oil Price Cap Compliance and Enforcement Alert (the "Price Cap Alert") (available here (EU), here (UK), and here (US)). In the alert, they outline Price Cap evasion methods and recommendations, focusing on six areas of concern in particular: 

• Falsified documentation and attestations: falsified documentation can be used to disguise the true price paid for Russian oil and petroleum products, obscure the origin of a vessel, its goods, and the destination, ultimately leading Coalition service providers to inadvertently contribute to non-price cap compliant transactions. 
• Opaque shipping and ancillary costs: manipulation of shipping and ancillary costs could be used as a method to obfuscate Russian oil and petroleum products being purchased above the price cap. In accordance with the implementation of per-voyage attestations and itemised price information for ancillary costs as set out above, the Price Cap Coalition aims at reducing the opportunities of operators using opaque shipping costs to disguise oil purchased above the price cap.
• Third country supply chain intermediaries and complex and irregular corporate structures: operators attempting to evade the Price Cap often look to third country supply chain intermediaries and / or use complex and irregular corporate structures or newly established entities in order to obfuscate the fact that they are trading Russian oil or petroleum products.

The Price Cap Coalition recommends enhanced due diligence with respect to all counterparties in the supply chain when trading in Russian oil or petroleum products, especially where there are red flags (for example as described above). This would include sanctions compliance programmes and monitoring, as well as appropriate Know Your Customer (KYC) and Know Your Customer's Customer (KYCC) procedures. Due diligence procedures should be utilised to build risk profiles of vessels and companies engaged in trading in Russian oil and petroleum products, in order to assess the level of risk exposure. 

• Flagging: certain activities relating to flagging, reflagging, the use of a false flag or flag hopping could be undertaken in order to obfuscate (i) the vessel's ownership, or (ii) the vessel's affiliation to Russia. Service providers are encouraged to consult industry resources as part of their due diligence. 
• The shadow fleet: the shadow fleet (or 'dark fleet' or 'ghost fleet') refers to older vessels anonymously owned or that have opaque corporate structures, engaging in deceptive shipping practices. This fleet allows Russian oil and petroleum products to be exported by way of circumventing applicable sanctions. Service providers are encouraged to conduct enhanced due diligence when considering utilising a vessel that would fit the description of the shadow fleet. In the 12th sanctions package against Russia, the EU has also introduced notification requirements for the sale of tankers to third countries in order to prevent these vessels being used by the shadow fleet. 
• Voyage irregularities: While there may be legitimate reasons to either divert from the original shipping route or to turn off the AIS, operators attempting to evade sanctions also deploy similar tactics to obfuscate ultimate destination, origin of the cargo, or transit, transshipment or ship-to-ship transfers. Service providers are encouraged to monitor vessels and regions which display evidence of voyage irregularities, AIS manipulation or spoofing. They are also encouraged to stay aware of locations commonly known for 'dark' activity and to scrutinise routes and destinations that deviate from normal business practices unless such deviations can be reasonably explained. They are also advised to investigate signs of previous AIS manipulation or spoofing prior to entering into new contracts. 

US tri-seal compliance note on obligations of foreign-based persons to comply with US sanctions and export control laws 

On 6 March 2024, the US Department of Commerce, Department of the Treasury and Department of Justice published a tri-seal compliance note on the applicability of US sanctions and export control laws to persons and entities located outside the US, and the enforcement mechanisms available for the US government to hold non-US persons accountable for violations of US sanctions and export control laws. 

OFAC's sanctions target non-US persons that cause or conspire to cause US persons to wittingly or unwittingly violate US sanctions, or that engage in conduct that evades US sanctions. As examples of conduct by non-US persons that will cause OFAC to employ their enforcement authorities against them include when a non-US person:

• Obscures or omits reference to the involvement of a sanctioned party or jurisdiction to a financial transaction involving a US person in transaction documentation;
• Misleads a US person into exporting goods ultimately destined for a sanctioned jurisdiction; or 
• Routes a prohibited transaction through the United States or the US financial system, thereby causing a US financial institution to process the payment in violation of OFAC sanctions. 

Export control laws administered by BIS extend to all items subject to the Export Administration Regulations ("EAR") anywhere in the world and to foreign persons who deal with them. In short, they apply to: 

• Reexports, or the shipment of the EAR item from one foreign country to another foreign country and in-country transfers; 
• Goods that incorporate a certain percentage of controlled US content (de minimis threshold); and 
• Exports from abroad, reexports, and in-country transfers of certain foreign-made items produced using US software, technology, or production equipment. 

The US Department of Justice is authorized to bring criminal prosecutions for wilful violations of US sanctions and export control laws, including against non-US persons. Non-US persons must therefore assess the impacts of US sanctions and export control laws on their operations and take the necessary steps to avoid violating these laws, including robust compliance measures. 

The tri-seal compliance note also includes compliance considerations for foreign-based persons.