Against the background of adopting a price cap, the EU amends the scope of the prohibitions on the transport to third countries of Russian oil

Context

On 3 December 2022, the European Commission ("EU") amended its restrictive measures ("Sanctions") in view of Russia’s actions destabilising the situation in Ukraine.¹  Aside from the introduction of a price cap for crude oil and petroleum products ("oil products") originating or exported from Russia, the EU also amended important provisions relating to the transportation of oil products to third countries.

These amendments were accompanied on the same day by the publication of an FAQ by the European Commission ("Commission").²

Background

In June 2022, the Council of the European Union ("Council") imposed a series of sanctions relating to the transport of oil products originating in or exported from Russian to third countries (non-EU countries):

• On 3 June 2002, the Council imposed a prohibition on providing technical assistance, brokering services or financing or financial assistance related to the transport to third countries of oil products originating in or exported from Russia ("Prohibition on Oil Transport Services").³
• On 6 October 2022, the Council imposed a prohibition on transporting to third countries crude oil or certain petroleum products falling under CN code 2710 that originate in or are exported from Russia ("Prohibition on Oil Transport").⁴

Extension of the scope of the Prohibition on Oil Transport Services and the Prohibition on Oil Transport

Through its 3 December 2022 amendments, the Council extended the Prohibition on Oil Transport Services and the Prohibition on Oil Transport to include the trade and brokering of oil products.

As a result, the Prohibition on Oil Transport Services now covers the provision directly or indirectly of technical assistance, brokering services or financing or financial assistance related to the trading, brokering or transport, including through ship-to-ship transfers, to third countries of crude oil or petroleum products which originate in Russia or which have been exported from Russia.

Similarly, the Prohibition on Oil Transport now covers the trading, brokering or transport, including through ship-to-ship transfers, to third countries of crude oil falling under CN code 2709 00, as of 5 December 2022, or petroleum products falling under CN code 2710, as of 5 February 2023.⁵

Introduction of a new exemption from the Prohibition on Oil Transport Services and the Prohibition on Oil Transport

Through the amendments adopted on 3 December 2022, the Council introduced an exemption from the Prohibition on Oil Transport Services and the Prohibition on Oil Transport. The exemption is to apply where necessary for the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment or as a response to natural disasters.

The use of this exemption is subject to an obligation of notification to the national competent authority.

Upcoming adoption of supportive measures for the EU shipping industry

Through the recitals to the new regulation, the Council also indicates that the Commission intends to adopt supportive measures aiming to preserve the credibility and strategic importance of the Union’s shipping industry, maintaining and further enhancing the competitiveness of EU shipping while protecting the interest of the competitive operation of ships flying the flags of Member States as well as encouraging the re-flagging of ships to Member States’ ship registers.

While the exact nature and scope of the supportive measures are yet to be determined, they should be adopted at the latest by 5 February 2023.

Entry into force

The new amendments to the Prohibitions on Oil Transport Services and the Prohibition on Oil Transport entered into force on 4 December 2022.

Companies involved in the trade of oil products (originating in or exported from Russia) should carefully review the new scope of the measures and carefully consider the impact on their business.

With extensive experience helping EU and non-EU companies navigate EU sanctions, Mayer Brown stands ready to help companies to assess the impact of the amendments and the price cap on their business.