Introduction:
The ongoing Russo-Ukrainian war has had global implications, particularly on commodities markets.
The EU continues to support Ukraine.
The EU has adopted its 11th package of sanctions against Russia.
This package aims to enhance the enforcement of existing sanctions based on lessons learned over the past year.
The 11th Sanctions Package is extensive, comprising 648 pages, covering economic and individual restrictions and measures against circumvention.
EU sanctions have limited Russia's ability to continue its war against Ukraine.
Key Elements of the 11th Sanctions Package:
Trade Measures:
Introduction of a new anti-circumvention tool to restrict specified sanctioned goods and technology exports to high-risk third countries.
Extension of the transit prohibition for sensitive goods exported from the EU to third countries via Russia.
Addition of 87 new entities to the list of those supporting Russia's military-industrial complex.
Tightening restrictions on imports of iron and steel goods.
Prohibition on the sale, license, transfer, or referral of intellectual property rights for restricted goods.
Ban on luxury car exports and certain machinery components.
Simplification of industrial goods annex for better identification of restricted goods.
Transport Measures:
Ban on trucks with Russian trailers and semi-trailers from transporting goods to the EU.
Prohibition of EU port access for vessels involved in ship-to-ship transfers violating sanctions.
Requirement for vessels to notify authorities in advance about ship-to-ship transfers.
EU port access prohibition for vessels manipulating navigation tracking systems during Russian oil transport.
Energy Measures:
End of pipeline imports of Russian oil for Germany and Poland.
Specific exemptions for the CPC pipeline transporting Kazakh oil.
Extension of the oil price cap exception for Sakhalin oil for Japan.
Additional Listings:
Over 100 individuals and entities subject to asset freezes.
Inclusion of various entities, including those in the Russian IT sector.
Additional Clarifications:
Revision of listing criteria for entities circumventing EU sanctions.
New listing criteria for entities operating in the Russian IT sector.
Derogations for certain transactions and provisions.
Other Measures:
Extension of media ban to additional channels.
Provisions on information exchange and reporting.
Temporary derogations for divestment-related services.
EU Sanctions Impact
EU sanctions have significantly affected Russia's political, economic, and military capabilities.
Ongoing efforts to prevent circumvention and improve cooperation with third countries.
Identification of critical goods for due diligence and vigilance.
Circumvention of Sanctions:
Sanctions were initially less effective due to circumvention.
Circumvention often involves using third-country intermediaries to export goods or services to Russia.
Example: Suspicion of Kyrgyzstan's involvement in circumventing EU Sanctions, significantly increasing exports.
Impact on Malaysian Companies:
Malaysian companies may be affected despite being non-EU entities.
EU Sanctions apply to EU nationals working in Malaysia and EU branch offices/representative offices in Malaysia.
Violations have severe consequences for employees and employers, potentially damaging reputations.
Impact on Malaysian-Russian Trade:
Russia is not among Malaysia's top trade partners.
A single breach of EU Sanctions can have severe consequences.
Example: US sanctions on a Malaysian company for alleged involvement with Iranian petrochemicals.
Protective Measures for Malaysian Companies:
Suspiciously verify requests for acting as intermediaries in exports to Russia.
Consider not involving EU nationals in dealings with Russia.
Conduct thorough legal, due diligence and compliance checks.
Implement contractual measures to reduce risks.
Conduct a risk-benefit analysis for continued business in Russia.
The 11th Sanctions Package introduces various measures aimed at strengthening existing sanctions against Russia, and it is essential for Malaysian companies to be aware of these developments to avoid potential legal and reputational risks when conducting business related to Russia.
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