EU’s new sanctions package against Russia focused on anti-circumvention measures

The European Commission finally introduced its long-awaited 11th sanctions package against Russia for its invasion of Ukraine, in an announcement on June 23.The new package was expected to be imposed back in May, but it was delayed because of disagreements between member states, with notable opposition from Hungary and Greece, sources told Fastmarkets.

Among other things, the new package includes a new anti-circumvention tool that is supposed to allow the EU “to restrict the sale, supply, transfer or export of specified sanctioned goods and technology to certain third countries whose jurisdictions are considered to be at continued and particularly high risk of circumvention,” according to the release on the Commission’s website.

In particular, the anti-circumvention tool will affect imports of iron and steel products processed in a third country that incorporate iron and steel products originating in Russia.

“At the moment of importation, importers shall provide evidence of the country of origin of the iron and steel inputs used for the processing of the product in a third country,” according to the document published on the EU Official Journal.

Thus, the new clause would affect semi-finished steel product exports from Russia, Fastmarkets understands.

Russian semi-finished imports have been specifically targeted before, in the eighth sanctions package introduced in October 2022, but with a long transition period and generous quotas, Fastmarkets reported previously.

Notably, between October 7, 2022, and September 30, 2023, 3.75 million tonnes of semi-finished steel products falling under CN code 7207 12 10 (steel slab) would be allowed to enter the EU market without restrictions. A similar amount — also approximately 3.75 million tonnes — of steel slab would be allowed to enter the EU between October 1, 2023, and September 30, 2024.

For products falling under CN code 7207 11 (steel billet), 487,202 tonnes will be allowed to enter the EU between October 7, 2022, and September 30, 2023; 85,260 tonnes will be allowed between October 1 and December 31, 2023, and 48,720 tonnes allowed January 1-March 31, 2024, according to the EU Official Journal.

Despite the intention of the sanctions — to restrict trade — some market sources have said that the generous quotas granted by EU authorities actually encourage slab imports from Russia. Material of this origin comes at a slight discount compared with Asian slab.

Russia’s slab imports to the EU amounted to 3.37 million tonnes in 2022, compared with 3.98 million tonnes in 2021. During 2023 to date, Russian mills have continued to sell slab to the bloc, with volumes in January-February 2023 of around 536,000 tonnes.

The new regulation would prevent non-EU suppliers from selling finished steel products manufactured from Russian semis to the EU market.

“This [new sanctions package] would, in theory, limit export of Turkish HRC to Europe because Turkey continues buying Russian slab. However, in reality it is unlikely to have a major impact on the market, since Turkish HRC suppliers have not really been active in the EU market recently, since they cannot compete with much cheaper Asian material,” an EU-based trader told Fastmarkets.

The new sanctions package also includes transport measures; notably, a prohibition of trucks with Russian trailers and semi-trailers from transporting goods to the EU. Marine transport will be targeted as well: vessels that engage in ship-to-ship transfers suspected to be in breach of the Russian oil import ban or G7 Coalition price cap will be banned from EU ports.

Published by: Julia Bolotova