The European Union countries have collectively approved the introduction of the 12th package of sanctions against Russia, which includes a number of measures, in particular a ban on imports of Russian diamonds.
The EU decision came into force on 1 January. The official announcement, highlighting the unity of EU nations in implementing these restrictive measures, stated:
“The European Council welcomes the adoption of the twelfth package of sanctions.”
At the same summit, the EU decided to allocate 10bn euros to Hungary, which had earlier blocked the signing of the official start of Ukraine’s accession talks with the EU.
However, almost immediately, Hungarian Prime Minister Viktor Orbán made a demand to block a separate vote to approve a four-year aid package worth 50bn euros. The minister emphasised that the deal should be for a smaller amount and last only one year.
Viktor Orbán is pushing for a larger €30bn of EU funds, which were frozen by the European Commission executive last year over concerns that the government in Budapest was undermining the independence of the country’s judiciary and allegations of rampant corruption.
The EU executive branch is still committed to Ukraine’s early accession to the Union, as well as to providing additional assistance to the state. European Council President Charles Michel announced the landmark decision to start the EU accession process, while emphasising the bloc’s readiness to negotiate accession with both Ukraine and Moldova, which will also start accession talks.
The new sanctions package is mainly aimed at better enforcement of existing sanctions. Previous sanctions targeting the oil sector have failed and they are largely a spent weapon, while technology sanctions have also largely failed to cut Russia off from Western technology.
A key component of the sanctions includes a comprehensive ban on imports of Russian diamonds, with additional measures planned to be phased in. Starting from March, a phased ban on diamond imports from third countries will be introduced, which is in line with the position of the G7 countries.
The package of new sanctions includes measures to strengthen vetting of companies claiming compliance with the G7 sanctions to limit Russian oil prices, in addition to the diamond embargo. The move is aimed at ensuring that companies trading in certain goods do not allow their partners to resell goods to Russia, especially in the context of dual-use technologies.
After failing to get Western control of the international maritime insurance business to enforce sanctions on oil price caps, they have engaged in a game of whack-a-mole where it imposes secondary sanctions on individual tankers and shipping companies without much effect. Many Russian-friendly countries in regions such as Turkey and Central Asia have also been complicit in facilitating the diversion of Western technology to Russia to avoid sanctions.
One notable aspect of the sanctions is an attempt to prevent Russia from gaining access to dual-use technologies. Among the proposals is a system to track goods from manufacturer to final destination to prevent supply tricks. Companies selling such goods would be required to ensure that their partners sign contracts explicitly prohibiting the resale of these goods to Russia.
On 13 December, the sanctions package was unanimously approved by member states. The exception was Austria, which asked for additional time to conduct a final due diligence before giving its approval. Sources familiar with the matter said that Austria’s delay was related to its attempt to get Raiffeisen Bank International, the largest Western bank in Russia, removed from the Ukrainian blacklist.
Hungary faced a similar challenge when its leading bank OTP was listed as Ukraine’s “international sponsor of war” this summer for failing to close its large Russian branch. Since then, as part of Kyiv’s attempts to placate Budapest, the bank has been removed from the list and language laws preventing the use of Hungarian in Ukrainian schools in the Carpathian region, which has a large Hungarian population, have been relaxed.
Ukraine also put Raiffeisen on the same list because the Austrian bank failed to sell its large Russian subsidiary despite repeated promises to do so.
Despite Austria’s reservations, the sanctions remain in place. Raiffeisen Bank International remains on Ukraine’s blacklist, highlighting the complex diplomatic considerations involved in imposing the sanctions.
Negotiations on what to include in the twelfth package of sanctions were very lengthy, and many measures did not make it into the final version.
The most controversial clause that disappeared from the draft version was the requirement to coordinate with regulators any remittances from the EU in favour of Russian companies or resident individuals. All that remains in the proposal is the requirement to notify EU national regulators of any transfers of more than €100,000.
Thanks to Greek lobbying, the new package will also not include a ban on tanker sales to the Russian “shadow fleet”. Greek tankers expanded their business of transporting Russian oil and other goods shortly after the war began, and recently Greek shipping tycoons have been making fortunes selling their vintage tankers to Russia at huge profits.
