EU Sanctions: Rationale and Challenges

EU sanctions form a key part of the tools available to the European Union to affirm its position and protect the EU in a fast moving geopolitical environment.

EU sanctions are restrictive trade measures adopted by the EU Council on the basis of proposals from the High Representative of the Union for Foreign Affairs and Security Policy and the EU Commission (DG FISMA). Member states are responsible for their enforcement under the supervision of the EU Commission.

EU sanctions target different types of persons/entities – such as governments of non-EU countries, as well as companies, groups, organisations, or individuals – and cover various measures – such as embargoes, travel bans, asset freezes, or restrictions on imports and exports. They are in principle not punitive.

The EU adopted various sets of sanctions in response to different crises in several countries, including Afghanistan, Belarus, Bosnia & Herzegovina, Burundi, the Central African Republic, China, the Democratic People’s Republic of Korea, the Democratic Republic of the Congo, Guinea, Haiti, Iran, Iraq, Lebanon, Libya, Mali, Moldova, Montenegro, Myanmar, Nicaragua, Russia, Serbia, Somalia, South Soudan, Sudan, Syria Tunisia, Turkey, Ukraine, the United States, Venezuela, Yemen and Zimbabwe. These measures can be found on the so-called EU Sanctions Map.

For example, in 2014, at the time of Russia’s invasion of Crimea, the EU Council adopted two Regulations imposing restrictive measures:

The armed conflict in Ukraine has generated the largest set of sanctions ever adopted by the EU. It provides an unprecedented illustration of the range of sanctions that the EU may adopt.

Indeed, the EU has so far adopted 11 packages of sanctions against the Federation of Russia imposing, on the one hand, individual sanctions freezing the assets of specifically targeted Russian persons and entities, and, on the other hand, restrictive economic measures on certain industries, including finance, energy, transport and technology.

The violation of the EU sanctions may amount to a criminal offence subject to penalties in some member states. 

On 23 June 2023, the EU Council adopted its 11^th package of sanctions. Several measures have been strengthened and over 100 new individuals and entities have been listed.

For example, trade restrictions have been strengthened, including the following measures:

In the energy industry, the EU Council :

Some would argue that several sanctions may in themselves question fundamental rights protected by the EU Charter. For example, Russian individuals or companies may not be represented by an EU lawyer, unless in proceedings before a court or an administrative body. 

Also, fundamental rights may be in conflict with the enforcement of EU sanctions. Often, entities are required to explain why they should not be sanctioned, whereas the sanctions should apply only to companies that are actually sanctioned and not be a form of indiscriminate or blanket enforcement, caused by the enforcer or the companies that must abide by the sanctions wanting to avoid taking any risks.

For example, on 25 February 2022, Euroclear – one of the two main international central securities depositories and settlement systems based in Brussels – decided to freeze all funds and securities held within its systems by Russian entities or individuals. In total, Euroclear has frozen EUR196.6 billion in Russian assets, of which EUR180 billion are Russian central bank assets. Many entities impacted by this freeze are non-sanctioned individuals or companies; nevertheless, they do not have access to their securities and funds and have to apply to obtain the unfreezing of their assets. 

On top of this, Euroclear invested the frozen assets for its own benefit (EUR841 million in 2022), which raises the question of the scope of the sanctions: what is the status of frozen assets, in particular, when the assets belong to non-sanctioned entities? 

Fortunately, the case law of the EU Court of Justice (ECJ) has shown that it does not hesitate to police the EU Council when the sanctions or their enforcement may violate key EU legal provisions or principles. 

As the above illustrates, the EU seeks to reinforce the effectiveness of EU sanctions and, at the same time, tries to balance the restrictive measures aimed at weakening the Russian government with the interests and fundamental rights of non-listed individuals and entities. Something which is proving to be a difficult exercise in this tense geopolitical context.