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Tomorrow's supply chain - EU's new sanctions package addresses high-tech item diversion from Russia

After a long process of deliberation, the EU is set to release its 11th sanctions package against Russia. Over the past year, as the sanctions on Russia continued to expand, questions arose as to the effectiveness of some of the measures taken. The landscape has currently reached a mature stage, where sanctions are not expected to significantly evolve in substance. The focus of the imposing jurisdictions, rather, have become enforcement of the measures taken and anti-circumvention.

The two main areas where the effectiveness of the measures have been called into question are the export restrictions on high-tech items destined to Russia, and the restrictions on Russia origin oil products – including an import ban into the EU and a maritime services ban on the transportation of such products bought above the applicable price cap per unit. 

To start with the latter, the main challenge in enforcement has been tracking the true origin of a given oil product. This is because, it has become common ground to ship an oil product to a non-sanctioned jurisdiction, subject it to certain processes that are sufficient to change the certificate of origin (without altering its functional essence), and ship it to jurisdictions that in fact have an import ban on the product (had it been labelled Russia-origin).

Another circumvention trend has been through “dark fleets” and ship-to-ship transfers. Once again, the idea is to alter the origin of the product such that it is no longer Russia-origin – hence freeing it from the sanctions restrictions that come with it.

In its upcoming sanctions package, the EU is looking to tackle these weak points. While the full details are not clear, it has surfaced that the EU will ban the transit, through Russia, of high-tech items and advanced technologies – in order to ensure that these goods only reach the stated end-user and is not diverted during its transport. It is almost certain that this measure will be include in the new package.

The second point, however, is causing a ruckus among the EU Member States. Namely, some of the Member States whose shipping sector make a major part of the economy, such as Greece, are opposing the proposed measures that would scrutinize certain ship-to-ship transfers. Hence, as unanimity is required for the adoption of the proposal, it remains to be seen whether this measure can be implemented – or whether we would be seeing a “watered down” version of it.


tomorrows supply chain, supply chain, sanctions, eu sanctions, transportation