EU Sanctions Year in Review 2023

In 2023, the European Union continued to use economic sanctions as one of its foreign policy tools, and not only in response to Russia’s war in Ukraine. New sanctions and adjustments to existing regimes reflect the EU’s positioning with respect to evolving geopolitical tensions, human rights violations, and threats to international peace and security. In addition to three more (10th, 11th, and 12th) EU Russia sanctions packages adopted with a focus on closing loopholes to enable stricter enforcement and increasing the impact of the restrictive measures, the EU, for instance, imposed sanctions in reaction to the Hamas’ terrorist attacks against Israel, Iran’s support of malign actors and non-compliance with its Joint Comprehensive Plan of Action (JCPoA) obligations, and the situation in Myanmar. The EU pushed Member States to harmonize penalties for sanctions violations and to enforce compliance. Sanctions enforcement in the EU in 2023 primarily concerned alleged violations of recently introduced trade sanctions, i.e., violations or circumvention of restrictions to prevent the export of critical goods and technology to Russia. It is safe to assume that the trend toward more economic comprehensive sanctions and stricter sanctions enforcement will continue in 2024, as shown already by the EU’s 13th sanctions package adopted on February 23, 2024, marking the end of the second year of Russia’s attack on Ukraine.

In this article, we reflect on the main legislative, policy, and enforcement developments for EU economic sanctions in 2023 and key recent developments in early 2024. For a review of the year in sanctions developments in other jurisdictions, please see our separate client alerts on OFAC Year in Review 2023 – Part 1 (OFAC’s major activities and programmatic updates); and U.S. Sanctions Enforcement: 2023 Trends and Lessons Learned.

I. Significant expansion of several country-specific sanctions regimes

A. Russia

As in 2022, Russia and its war of aggression against Ukraine were at the heart of the EU’s sanctions regulations again last year. In the face of Russia’s ongoing military escalation, the EU adopted three additional packages of sanctions designed to further weaken Russia’s economic base, depriving it of critical technologies and military items, as well as its access to revenue-generating markets, and significantly curtailing its ability to wage war. As a reminder, the key legislative instruments for the EU’s Russia sanctions, which the EU further amended and expanded over the course of last year, are the following:

• Regulation (EU) 269/2014 (designations of individuals, entities, and organizations as asset freeze targets and related prohibitions and restrictions)—financial sanctions in respect of actions undermining or threatening the territorial integrity, sovereignty, and independence of Ukraine now apply to a total of nearly 1,950 designated individuals and entities. According to the EU Council, the total value of assets of sanctioned individuals and entities frozen in the EU is EUR 21.5 billion, with an additional EUR 300 billion of assets from the Central Bank of Russia blocked in the EU and G7 countries; and
• Regulation (EU) 833/2014 (in particular, trade-related sanctions and restrictive measures targeting certain economic sectors, as well as key institutions and companies in Russia)—since Russia’s invasion of Ukraine and until September 2023, as a result of sanctions, the share of EU imports from Russia fell from 9.5% to 2.0%, while Russia’s share of extra-EU exports fell from 3.8% to 1.4%.

In more detail, the EU’s three sanctions packages targeting Russia in 2023 imposed the following restrictive measures:

The EU’s 10th package of Russia sanctions, adopted on February 25, 2023:

• designated about 120 additional Russian individuals and entities as asset freeze targets (including Russian banks Alfa-Bank, Rosbank, and Tinkoff Bank);
• introduced far-reaching trade restrictions, including export bans on sensitive dual-use and advanced technology items that contribute to Russia’s military capabilities;
• imposed broadcasting bans on RT Arabic and Sputnik Arabic; and
• introduced new grounds for authorizations to facilitate divestment of EU companies from Russia within certain (tight) deadlines.

The 11th package of Russia sanctions, enacted on June 23, 2023:

• added over 100 individuals and entities to the financial sanctions list (including MRB Bank, CMR Bank, and several Russian IT companies);
• significantly expanded the EU’s trade restrictions on Russia, in particular by introducing a ban on the transfer of any IP and trade secrets broadly related to restricted items, by further broadening export restrictions and by requiring importers of iron and steel goods processed in a third country to prove that the inputs used do not come from Russia; and
• placed five more media outlets (RT Balkan, Oriental Review, Tsargrad, New Eastern Outlook, and Katehon) under its broadcasting ban.
• Concurrently, the EU broadened and prolonged derogations available for divestment and wind-down activities and for certain activities required to implement a “firewall” to remove control of EU companies from sanctioned Russian entities or individuals.

The 12th Russia sanctions package, adopted on December 18, 2023:

• designated over 140 individuals and entities as asset freeze targets (including Russian insurance company Alfa Insurance);
• introduced the long-negotiated import ban on Russian diamonds, coordinated at the G7 level and aimed at depriving Russia of an important revenue stream (the imposition of the diamond ban was followed by the EU designation of Russian diamond miner Alrosa and its CEO Pavel Alekseevich Marinychev in early 2024);
• restricted the import from Russia of certain metal materials and liquified petroleum gas, as well as the transfer to Russia of additional industry, tech, and dual-use goods and technology to weaken Russia’s military and industrial capabilities;
• strengthened the G7+ oil price cap by more closely monitoring the sale of tankers to third countries and increasing attestation requirements; 
• prohibited the provision of enterprise and design-related software to Russian companies;
• put an end to the current legal exemption for all business services (including the provision of software) to Russian subsidiaries of companies incorporated in the EU, EFTA, or certain partner countries (U.S., UK, Japan, South Korea, Australia, Canada, New Zealand)—as of June 20, 2024, an authorization granted by the competent national sanctions authority/ies will be required to continue providing in-house business services. In reaction, to ease efforts for companies and authorities alike, the competent national authorities are considering introducing general authorizations for the supply of software and provision of business services for group companies in Russia. The German Federal Office for Economic Affairs and Export Control (BAFA) has already published its respective “Allgemeine Genehmigung Nr. 42” on February 20, 2024; and
• imposed an obligation for EU entities that are more than 40%-owned by Russian citizens or entities to report transfers of funds exceeding EUR 100,000 out of the EU, and, as of July 1, 2024, a corresponding obligation of EU financial institutions to report such fund transfers to the competent national authorities.
• At the same time, the EU prolonged the derogations from certain restrictive measures for divestment from Russia or wind-down of business activities in Russia (until June 30, 2024, for certain import and export restrictions, until July 31, 2024, in relation to business services, and until December 31, 2024, for certain dealings with Russian state‑owned entities subject to the transaction prohibition in Art. 5aa of Regulation (EU) 833/2014).

The above lists of restrictive measures imposed against Russia last year are by no means exhaustive. Another focal point of the EU’s Russia-related sanctions policy that will continue to play a prominent role in 2024 were several measures targeting the circumvention of sanctions, in particular via trade with third countries, and attempting to close the loopholes of sanctions enforcement. By way of example:

• the 10th Russia sanctions package introduced broader reporting obligations on frozen assets of designated persons (including in relation to dealings before the designation took effect) to facilitate tracing of assets by the competent national authorities and prevent their concealment;
• the 11th Russia sanctions package restricted port access for vessels that engage in certain suspicious dealings (e.g., ship-to-ship transfers or manipulation of navigation tracking systems) undermining the price cap on Russian oil agreed at the G7 level, and also created additional listing grounds to cover persons involved in frustrating the sanctions imposed on Russia;
• the 12th Russia sanctions package introduced an obligation for EU exporters to contractually prohibit the re-export of certain sensitive goods to Russia (see the recently published guidance by the EU Commission on the “no re-export to Russia” clause), including goods related to aviation, jet fuel, firearms, and dual-use goods and advanced technology items on the “List of Common High Priority Items” (last updated in February 2024) found on the battlefield in Ukraine, and tightened the obligation on Member States to proactively trace assets in order to prevent and detect instances of sanctions evasion; and
• all three sanctions packages broadened the scope of the ban on the transit of certain trade-restricted items through Russian territory to third countries to prevent Russian access to sensitive items with industrial or military relevance.

In the same vein, to tackle circumvention, the EU:

• imposed particularly strict trade controls on several companies registered in third countries such as China, Uzbekistan, the UAE, Iran, Syria, Armenia, and Singapore;
• published guidance for EU operators on implementing enhanced due diligence to shield against Russia sanctions circumvention and adopted the “Economically Critical Goods List,” for which anomalous trade flows through certain third countries to Russia have been observed (covering goods classified under the HS chapters for “Chemicals,” “Machinery,” “Electronics,” and “Vehicles”); and
• implemented a new anti-circumvention tool serving as “last resort,” allowing the EU to restrict the transfer of sensitive goods and technology to certain third countries identified by the Counsel as having “systematically and persistently failed to prevent” supplies of such items shipped from the EU to Russia—so far, the relevant Annex XXXIII to Regulation (EU) 833/2014, created by the 11th Russia sanctions package and meant to list the in-scope items and countries, remains empty.

B. Belarus

Compared to the extensive sanctions imposed against Russia in 2023, the additional restrictive measures targeting Belarus adopted in the past year were moderate. The EU extended the Belarus sanctions regime, in place since 2004, for another year on February 27, 2023. It also adopted additional restrictive measures on August 3, 2023. Citing the deteriorating human rights situation in Belarus and the country’s continuous involvement in Russia’s war of aggression against Ukraine, the EU:

• designated 38 individuals and three entities from Belarus as asset freeze targets; and
• expanded the existing export restrictions to include goods and technology suited for use in aviation and the space industry, firearms, additional dual-use and high-tech goods and technology, as well as goods used by Russia for its war of aggression against Ukraine, including semiconductor devices, electronic integrated circuits, manufacturing and testing equipment, photographic cameras, and optical components.

C. Iran

Following Council conclusions strongly condemning not only the human rights situation in Iran but also Iran’s military support for Russia’s war of aggression against Ukraine—in particular by supplying Russia with Unmanned Aerial Vehicles (UAVs) found on the battlefields in Ukraine—the EU established a new framework for restrictive measures on July 20, 2023. The new framework for restrictive measures targeting Iran’s military support of Russia prohibits the export of UAV manufacturing components to Iran, and following the first designations on December 11, 2023, so far lists six individuals and five entities as asset freeze targets. The EU also designated additional Iranian individuals involved in Iran’s UAV program under Regulation (EU) No 269/2014 (Ukraine). One further Iranian individual, Deputy Commander of the Islamic Revolutionary Guard Corps (IRGC) Aerospace Force, was sanctioned for Iran’s military support to the Syrian regime by sending military equipment and personnel.

In parallel, in a rarely seen series of sanctions regulations (on January 23, February 20, March 20, April 24, May 22, June 26, and September 15, 2023), the EU designated an additional 82 individuals (among them Iranian Minister of Culture and Islamic Guidance and Minister of Education and further representatives of government and the Iranian parliament, important political and media figures, high-ranking members of the Iranian security forces, including of the IRGC, of the police and judiciary, and clerics) and 31 entities (including Iranian mobile service provider Ariantel, Tasnim News Agency, and several government entities and organizations associated with the Iranian regime and the IRGC) in view of their responsibility for violent crackdowns against peaceful protests, arbitrary detentions, torturing of convicts, and death sentences in Iran. Restrictive measures under the EU’s Iran human rights sanctions regime now apply to a total of 227 individuals and 43 entities, in addition to bans on exporting equipment that might be used for internal repression and for monitoring telecommunications to Iran.

Simultaneously, the EU Council opted to uphold existing restrictive measures (designations of individuals and entities, sectoral and individual measures related to Iran nuclear proliferation, as well as arms and missile embargoes) under the non-proliferation sanctions regime for Iran beyond the JCPoA Transition Day (October 18, 2023) on October 17, 2023. The EU considers its decision to be in line with UN Security Council Resolution 2231 and the JCPoA, referring to Iran’s failure to fulfill its commitments under the JCPoA as reported by the International Atomic Energy Agency since 2019.

D. China

Other than a limited number of designations of Chinese entities under the Russia sanctions program, no sanctions were adopted against China or Chinese entities in 2023 at the EU level. The EU did, however, announce its European Economic Security Strategy in June 2023, which includes a number of national security instruments other than sanctions primarily designed to apply a “de‑risking” strategy toward China to protect against economic security risks. As the European Economic Security Package (published in January 2024) shows, the tools so far focus on foreign investment control, outbound investment control, export controls, R&D in the dual-use space, as well as research security.

Notably, at the Member State level and following the U.S.’s lead, the Netherlands enacted certain export control restrictions concerning semiconductors.

E. Myanmar (Burma)

On January 31, 2023, the EU’s High Representative Josep Borrell issued a declaration on behalf of the EU on the second anniversary of the military coup staged in Myanmar/Burma stating that, in the absence of any swift progress on the situation in Myanmar, the EU stood ready to adopt further restrictive measures against those directly responsible for and those abetting the undermining of democracy and the serious human rights violations in the country.

In view of the continuing escalation of violence in Myanmar and the evolution toward a protracted conflict with regional implications, continuing grave human rights violations by the Myanmar armed forces, including torture; sexual and gender-based violence; the persecution of civil society actors, human rights defenders, and journalists; and attacks on the civilian population, including ethnic and religious minorities, the EU has followed through on this announcement: It imposed restrictive measures against those responsible for the military and police repression against peaceful demonstrators on February 20, July 20, and December 11, 2023, with the list of parties designated as asset freeze targets under the EU’s Myanmar sanctions regime now amounting to more than 100 individuals and more than 20 entities. The 2023 designations target key figures and entities linked to the Myanmar Armed Forces (Tatmadaw), the Myanmar Police Force, and the Border Guard Police, including the Minister for Energy, high-ranking officers of the military regime, state entities such as departments of the Ministry of Defense, as well as private companies supporting the military. Other ongoing EU sanctions against Myanmar include an arms embargo and further export restrictions on dual-use items for certain end-uses as well as monitoring equipment that might be used for internal repression.

F. Sudan

Throughout 2023, the EU’s High Representative Josep Borrell, on behalf of the EU, issued statements strongly condemning the ongoing conflict between the Sudanese Armed Forces and the Rapid Support Forces in Sudan, criticizing the parties’ refusal to seek a peaceful solution and emphasizing that the EU stands ready to consider the use of all means at its disposal, including restrictive measures, to contribute to putting an end to the conflict and encourage peace. In view of further dramatic escalation of violence against civilians and ethnic cleansing, on October 9, 2023, the EU Council adopted a new sanctions framework concerning restrictive measures in view of activities undermining the stability and political transition of Sudan. The new regime allows for targeted financial sanctions against designated individuals and entities responsible, e.g., for actions or policies that threaten the peace, stability, or security of Sudan, obstructing or undermining efforts to resume the political transition in Sudan, obstructing the delivery of, access to, or distribution of humanitarian assistance in Sudan, or involved in planning, directing, or committing acts in Sudan that constitute serious human rights violations or abuses or violations of international humanitarian law. The new regime applies alongside the EU’s existing sanctions regime implementing the UN Security Council Resolutions regarding the situation in Sudan.

G. Other country-specific regimes

The EU also introduced, amended, or prolonged restrictive measures against several other countries in 2023.

Notably, the EU, for the first time, adopted sanctions regimes in relation to the Republic of Moldova and Niger:

• On April 28, 2023, the Council enacted Regulation (EU) 2023/888 concerning restrictive measures in view of actions destabilizing the Republic of Moldova, targeting persons responsible for actions and policies that undermine or threaten the sovereignty and independence of or democracy, the rule of law, stability, or security in the Republic of Moldova. In May 2023, the EU designated five individuals, including Moldovan politicians engaged in attempts to destabilize the Republic of Moldova and two Russian nationals involved in financial misconduct (one of them acting as the Russian “purse” in attempts to bring the country under the control of the Kremlin), under the new regime. Separately, two individuals with Moldovan and Russian nationality were designated for their efforts to undermine the territorial integrity of Ukraine by supporting Russia’s war of aggression.
• On October 23, 2023, the Council adopted Regulation 2023/2406 as a new legal basis for sanctions in response to the July 2023 military coup in Niger. The new regime allows for the designation of individuals and entities responsible for actions or policies that threaten the peace, stability, or security of Niger, undermining the constitutional order, democracy, or the rule of law in Niger, or involved in acts in Niger that constitute serious human rights violations or abuses or violations of international humanitarian law. As of the date of the publication of this client alert, no individuals or entities have been designated under the EU’s Niger sanctions regime.

Other restrictive measures imposed by the EU in 2023 targeted individuals and entities in Syria responsible for the production and trafficking of narcotics, notably Captagon, and for supporting the Syrian regime in its repressive policies, abuses of human rights, and violations of international humanitarian law, as well as individuals in the Democratic Republic of the Congo responsible for human rights violations and abuses and for sustaining armed conflict, instability, and insecurity.

II. Horizontal sanctions regimes

In addition to the country-specific programs, the EU also continued to make use of its so-called “horizontal” (or “thematic”) sanctions regimes to target condemned activities of individuals and entities worldwide.

A. Human rights sanctions regime

Throughout the year, the EU designated additional persons involved in serious human rights violations under its Global Human Rights Sanctions Regime, which targeted 67 individuals and 20 entities at the end of 2023. By way of example, the new designations concerned individuals and entities of the Wagner Group in view of their human rights violations and abuses in several countries (including Ukraine, Libya, the Central African Republic, Mali, and Sudan), members of the Taliban government, Russian police officers, and members of the Russian armed forces, high-ranking military commanders in South Sudan, the Central African Republic, and Myanmar, and several other individuals and entities responsible for gender‑based violence and abuse of women worldwide, as well as Russian officials involved in the internal repression and imprisonment of opposition politicians (including democracy activist and outspoken Kremlin critic, recently deceased while imprisoned in Russia, Alexei Navalny) and in the continuing deterioration of the human rights situation in the Crimean peninsula.

B. Terrorism sanctions regime

The EU also listed further persons under its specific measures to combat terrorism with respect to ISIL (Da’esh) and Al-Qaeda (beyond the sanctions imposed by the UN Security Council) as well as Hamas:

• In view of the continued threat posed by ISIL (Da’esh) and Al-Qaeda, the EU designated two additional individuals and one group (ISIS-Mozambique) as asset freeze targets under Regulation (EU) 2016/1686 on April 24, 2023.
• Following Hamas’ brutal terrorist attacks in Israel on October 7, 2023, the EU Council, on December 7, 2023, added two individuals to the EU terrorist list: Mohammed Deif, Commander General of the military wing of Hamas, and Marwan Issa, the deputy Commander of the military wing. It also started to work on a separate sanctions program targeting those supporting Hamas’ terrorist activities (the program was adopted in early 2024; see “Conclusions and outlook for 2024” section below).

III. Exceptions to facilitate the delivery of humanitarian assistance

Through modifications of several of its sanctions regimes decided on March 31, 2023, and November 27, 2023, the EU introduced additional humanitarian exceptions to asset freeze measures to align with UN Security Council resolution 2664 (2022) and to avoid unintended negative consequences on humanitarian action of its sanctions regime. The exceptions allow humanitarian actors—including UN programs and non-governmental organizations participating in UN humanitarian response plans, as well as organizations and agencies certified as humanitarian partners of the EU or its Member States and Member States’ specialized agencies—to engage in transactions with designated persons to deliver humanitarian assistance or to support other activities supporting the basic human needs of people in need. The EU introduced the exceptions to apply to EU sanctions regimes transposing UN sanctions (including autonomous EU listings under the respective regimes) and autonomous EU sanctions regimes alike.

IV. Enforcement trends

Driven by certain shortcomings and inconsistencies in the enforcement of sanctions at the Member State level that became apparent in the context of the EU’s Russia sanctions, a key concern of the EU’s sanctions policy in 2023 was directed at harmonizing and tightening the enforcement of restrictive measures while closing existing loopholes and combating sanctions circumvention. Enforcement action by EU Member State courts and authorities (e.g., in the Netherlands and in Finland) indeed concerned violations of trade sanctions such as supplying dual-use goods, drones, electronics, or aerospace parts to Russia.

Attempts at the EU level to address and strengthen sanctions implementation and enforcement therefore primarily focused on the framework of the Russia sanctions regime—in particular, by significantly expanding the obligation to report (to be) frozen assets (which applies to EU financial institutions and designated parties) and by requiring Member States to proactively trace assets in order to prevent and detect sanctions evasion. It can be assumed that some of these measures, if successful, will find their way into the EU’s other sanctions regimes and may soon become part of the EU’s best practice for effective sanctions implementation.

At the same time, the EU took major steps toward a harmonized criminal law framework for sanctions enforcement that would apply to all sanctions regimes and across all Member States. Following the Council’s decision to add the violation of restrictive measures to the list of “EU crimes” on November 28, 2022, and the EU Commission’s initial proposal of December 2, 2022, for a directive containing minimum rules concerning the definition of criminal offenses and penalties for the violation of EU (see our 2023 client alert on the Enforcement of EU Sanctions – Soon New Powers for the European Public Prosecutor’s Office?), the Council and the European Parliament reached political agreement on a new EU directive that introduces harmonized requirements for criminal offenses and common minimum standards for procedure and penalties relating to the violation of EU sanctions on December 12, 2023. Among many other measures, the agreed proposal provides for a maximum penalty of at least five years of imprisonment in relation to certain sanctions violations. Member States remain free to implement laws that allow for even higher sentences.

V. Conclusions and outlook for 2024

2023 marks another significant year in the development of EU sanctions. Companies operating in the EU, including non-EU companies doing business with (even limited) touchpoints in the EU, need to closely monitor the evolving landscape quickly, comply with enhanced due diligence and reporting requirements, and adapt their business to ever new and broader restrictions.

On the imminent horizon, the exemption for business services to Russian subsidiaries of companies in the EU (or partner countries) will expire in 2024 (on June 19, 2024), and licenses will be required for any further services beyond that date. Divestments from Russia that require a license for transfer of local assets will only be licensed until the end of June 2024 (if the EU does not extend this deadline again).

The EU has started the new year with several new sanctions measures, and we expect this trend to continue. For example, in January, the European Council established a dedicated sanctions framework against those who support, facilitate, or enable violent actions by Hamas and the Palestinian Islamic Jihad (PIJ), in response to recent attacks against Israel. With the aim of preventing future acts of violence, the framework allows the EU to target those who provide material or financial support to Hamas or the PIJ, participate in planning acts of violence, supply weapons to the organizations, undermine Israel’s stability, or violate international humanitarian and human rights laws. Therefore, six persons have already been listed for providing financial support to Hamas.

Marking the end of the second year of Russia’s full-scale invasion of Ukraine, the EU adopted its 13th package of Russia sanctions on February 23, 2024. The package focuses on the designation of an additional 106 individuals and 88 entities as asset freeze targets. It also attempts to further limit Russia’s access to military technology by making 27 further entities (including companies from China, Kazakhstan, India, Serbia, Thailand, Sri Lanka, and Turkey) subject to particularly strict restrictions on trade in dual-use items and technology which might contribute to Russia’s military and technological enhancement, as well as by introducing additional export bans on certain drone components. At the same time, 2024 is expected to see a continued focus on increasing sanctions enforcement of the existing restrictions as the EU apparently does not have many options left to harm Russia’s economy without affecting its own economy in a significant manner. The EU Commission’s recently published guidance for EU operators regarding the implementation of enhanced due diligence to shield their operations against Russia sanctions circumvention is a pointer in this direction.

With respect to further escalation of the tension between China and Taiwan the EU is likely to continue a path of de-risking rather than imposing any significant economic sanctions.

MoFo’s National Security Practice would be happy to discuss any of the issues raised in this alert in more detail and looks forward to keeping our readers current on key sanctions developments in 2024.

Frederike Becker, trainee in our Washington, D.C., and Berlin offices, contributed to the drafting of this alert.