Risk Intelligence Insights

Towards a unified approach to sanctions enforcement: the new EU 14th Sanctions package

Ruth Helena Alves da Mota

Content Partnership Manager, LSEG Risk Intelligence

Zhanna Kondzirska

Threat Finance Research Team Lead for EMEA, LSEG Risk Intelligence

As the EU 14th package of sanctions against Russia is set to be adopted soon, this is what you can expect.

Despite ongoing efforts by sanctioning authorities, designated parties are demonstrating their ability to circumvent restrictions.

In view of this, a comprehensive approach to sanctions policy is relevant, one in which the current restrictions are complemented by strong control over their implementation and an immediate response to attempts to evade sanctions through Western subsidiaries operating in countries outside of Europe.

The focus of the upcoming 14th package has shifted to anti-circumvention tactics in the maritime sector, as described by the European Commissioner for Trade, Mr Valdis Dombrovskis, in his statement addressing the European Parliament: “While direct exports to Russia from the EU and other sanctioning countries have declined, some exports of sanctioned goods have reached Russia via certain non-EU countries and via subsidiaries of European companies that operate outside the EU”.[1]

Some of the loopholes which have been used by sanctioned parties are mixing sanctioned oil with the oil from non-sanctioned third countries, ship-to-ship transfers, or use of multiple layers of corporate structures to hide the true beneficial owner. Parallel imports and the import and export of dual-use goods, which are items that can be used both for civilian and military purposes, are other popular circumvention method.

The EU has made it its top priority to stop sanctions evasion on sensitive goods which can be found in Russian weapons, are items critical for their production, or are used in aggression against the Ukraine. Notwithstanding these efforts, Russia continues to receive banned technology through third countries, as well as companies and subsidiaries based in these countries. Mr Dombrovskis states: “European sanctions prohibits the export of these components and the associated financing by European banks, however some European operators continue to export to non-EU countries, which then re-export to Russia”.[2] 

This and other highlights are expected to be addressed in the upcoming 14th package:

Liquefied natural gas

The package will provide a ban on the transshipment of Russian LNG in European ports, from where it is then shipped around the world. This will not apply to imports into the EU. The EU will also ban new investments and provision of goods and services to the Russia's Arctic and Murmansk LNG projects.

Shadow fleet

The European Commission wants to impose sanctions on several vessels from the so-called "shadow fleet", which transport Russian oil despite EU restrictions. They will be banned from entering European ports. 

Art market

In particular, the European Commission proposed to ban the sale of Ukrainian works of art in the EU market if there are suspicions they could have been looted.

Propaganda outlets

Recently, four Russian state media outlets were added to the European Union’s blacklist ahead of the 14th sanctions package.[3]

The EU noted that those specific media sources are under constant direct or indirect control of Russian leadership and play a significant role in the deployment and support of Russia's war of aggression against Ukraine, as well as in the destabilisation of its neighbouring countries.

Russia's funding of EU political parties and foundations, as well as non-governmental organizations and research centres, will also be banned.

Export ban

Exports of manganese ore, mining machinery, monitors, electronics and possibly helium will be banned.

These measures are set to hit the Russian economy hard. Speaking on the effectiveness of EU sanctions, Mr. Dombrovskis reports that Russia’s current surplus has dropped by 80% in 2023 This means that its exports have taken a hard knock, and the Russian rubble has lost more than 40% of its value since the summer of 2022 when it was at its peak. As Russia derives much of its capital from the Energy sector, by targeting it and curbing circumvention enablers, the EU hopes to continue to destabilize the Russian economy and military and reach an end to the war.

Implicit sanctions

EU parent companies that retain influence over the business operations of their foreign subsidiaries may be liable for the operations carried out by these.

According to the proposal, transport companies that are at least 25% owned by Russians will be banned from operating in the EU.

How to stay compliant?

Obliged entities and corporates involved in trading commodities in the EU, will need to strengthen their KYC screening and due diligence to identify relevant third parties, associated red flags and diversion routes. 

World-Check’s Sanctions coverage

World-Check includes designated parties reported in sanctions lists, and in addition expanded coverage is provided based on research into the shareholding and beneficial ownership of subsidiaries of listed parties, which are not listed by name. Sanctions are our highest priority and receives dedicated attention. Major sanctions lists such as the OFAC, EU, UN, UK, etc, are monitored and covered on a 24/7/365 basis. There are currently 57,000+ active sanctions records across 300+ sanction programmes as part of the World-Check sanctions-screening coverage.

[1] Speech at EP S&D conference on sanctions (europa.eu)

[2] Speech at EP S&D conference on sanctions (europa.eu)

[3] EU ambassadors agree to place four Russian media outlets on sanctions list | Reuters

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