EU/UK Russia Sanctions: Potential De-escalation of Sanctions and Divergence from U.S. Regime

Background

The war in Ukraine has taken a new diplomatic turn in recent weeks.

Having historically aligned with the European Union (EU) and United Kingdom (UK) on its condemnation of Russia’s war in Ukraine, and the need for a full restoration of Ukraine’s contested territory, the United States (US) has begun holding bilateral talks with Russia on the prospect of a peace deal in Ukraine, a normalisation of US–Russia relations, and the possibility of future economic co-operation, having deemed Ukraine North Atlantic Treaty Organization (NATO) membership and a return to pre-2014 borders ‘unrealistic’. US-brokered ceasefire talks, with a view to a long-term settlement, are already underway with respect to Ukraine and Russia.

Such US actions have similarly prompted EU / UK powers to consider the prospect of a settlement, the terms on which they might be agreed, as well as the geopolitical, security, and sanctions landscape thereafter. Whilst the EU and UK recently committed to the maintenance and expansion of their sanctions on Russia (the EU and UK respectively unveiled their 16th sanctions package and the “largest [UK] sanctions package against Russia since 2022” on 24 February 2024), the UK has nonetheless praised the US administration for changing the “global conversation” on the war in Ukraine “for the better”. Under the UK-brokered ‘coalition of the willing’, roughly 20 states from Europe and the Commonwealth have now begun high-level discussions on peace plans for presentation to the US administration as well as arrangements necessary to help secure any truce in Ukraine.

With the prospect of the US, EU and UK powers working to organise a settlement in Ukraine, there also arises the prospect of a collective (but not necessarily co-ordinated) de-escalation of US, EU and UK sanctions against Russia. Accordingly, readers may find it helpful to consider the processes and timelines by which the EU and UK authorities repeal or suspend their respective sanctions measures, as well as potential regime divergence scenarios, as further described below.

Mechanisms for Repealing or Suspending EU and UK Russian Sanctions¹

The repeal or suspension of EU and UK sanctions measures are achieved through distinct internal processes. Any repeal or suspension decisions will not necessarily involve the immediate cessation of EU / UK Russia sanctions. Among various potential outcomes, such suspension or repeal could be implemented through a series of amendments / new decisions and regulations which gradually phase out the prohibitions targeting Russia. The content of these piecemeal / gradual measures (e.g. which export prohibition will be lifted first and under what conditions) will also be dictated by the considerations discussed herein.

For the purposes of this article, ‘suspension’ refers to actions that temporarily remove the effect of certain sanctions measures which nonetheless remain in force, whilst ‘repeal’ refers to the outright revocation of applicable sanctions measures.

EU Sanctions Repeal or Suspension Process

All EU sanctions are given effect through two legal instruments: a Council Decision and a Council Regulation. Although distinct instruments, they are usually adopted together and enter into force on the same day or, with respect to certain Council Regulations, the day after publication. The Council Decisions with respect to EU Russia sanctions (EU-Russia Council Decisions) contain expiry dates, subject to renewal, whereas the Council Regulations with respect to EU Russia sanctions (EU-Russia Council Regulations) remain in force until repealed.²EU Russia sanctions do not have repeal criteria and instead state that the “Decision[s] shall be kept under constant review. It shall be renewed, or amended as appropriate, if the Council deems that its objectives have not been met”.

The EU’s Sanctions Guidelines state that sanctions ought to be lifted if either the ‘repeal criteria’ or ‘objectives’ of the restrictive measures are satisfied and that the Council has the right to lift sanctions even where such repeal criteria / objectives have not been met “where the Council decide otherwise”.³

Within this context, the repeal or suspension of EU sanctions may be achieved through one of two potential means: (i) a proactive decision by the Council to repeal / suspend the restrictive measures prior to their expiry, or (ii) the Council failing / refusing to renew the EU Russia Sanctions further to their expiry and taking certain corresponding steps.

• Proactive decision taken by the Council to lift sanctions prior to their expiry – Under this approach, any decision taken by the Council must follow the rules and processes for decision-making. In that process, specific proposals in respect of sanctions measures (such as repeal or suspension) are submitted to the Council for approval by Member States or the European External Action Service. Approval is achieved via a unanimous decision of the Council members, and its corresponding regulation is adopted by the Council immediately afterwards acting as a ‘qualified majority’.⁴

Under this method, a qualifying party would need to submit a proposal for repealing or suspending the EU Russia sanctions to the Council for discussion, which would take the form of a prospective Council Decision. The Council would then need to unanimously agree to the proposed Council Decision and implement the corresponding Council Regulation for necessary repeal / suspension actions via qualified majority.⁵

• Expiry (without renewal) of the relevant sanctions measure – Under this approach, the Council would simply need to let the relevant restrictive measure expire and act accordingly. As noted above, EU sanctions are implemented through two distinct legal instruments adopted together: a Council Decision and Council Regulation. Whilst EU-Russia Council Regulations continue indefinitely until repealed, EU-Russia Council Decisions do have an expiry period. It is therefore possible for the EU-Russia Council Decisions to expire further to Council inaction (either wilfully or through failure to obtain unanimous consent for renewal) and for the Council to take a motion to explicitly repeal the outstanding EU-Russia Council Regulations via qualified majority. Such actions would be in keeping with the EU’s Sanctions Guidelines, which state that, as a matter of practice, “Regulations should be repealed at the same time as or immediately after the CFSP legal act [(i.e. the relevant Council Decision)] ceases to apply”.⁶

However, it should be noted that the EU-Russia Council Regulations are distinct legal instruments to that of the EU-Russia Council Decisions and that the Council (or its members) are not legally obliged to table a motion for a Council Regulation’s repeal further to a lapsed Council Decision or vote accordingly. Technically, the Council could decide to let the EU-Russia Council Regulations remain in force notwithstanding the lapsed EU-Russia Council Decisions.⁷  Moreover, where a motion to repeal the EU-Russia Council Regulations is tabled, Council members could vote against the proposal to remove the EU-Russia Council Regulations (and thus EU Russia sanctions) notwithstanding the lapsed EU-Russia Council Decisions.

Accordingly, as a practical matter, it remains unclear how this scenario where the EU-Russia Council Decision does lapse due to divided opinion (and thus no unanimous consent) would develop. Would Council members continue to abide by agreed common practice (to repeal the Council Regulation further to a lapsed Council Decision) or would they instead opt to exercise their technical power to maintain the EU-Russia Council Regulations notwithstanding the lapsed EU-Russia Council Decisions? This will ultimately depend on the political appetite of the Member States in question.

UK Sanctions Repeal or Suspension Process

There is no formal review period or expiry date for UK sanctions regulations, including the Russia (Sanctions) (EU Exit) Regulations 2019 (UK Russia Sanctions). Neither the framework legislation under which the UK adopts any given sanctions regime, Sanctions and Anti-Money Laundering Act 2018 (SAMLA), nor the UK Russia Sanctions contains a formal review mechanism⁸  and SAMLA grants the UK government the general power to suspend, amend or revoke sanctions legislation as it sees fit.⁹  The explanatory memorandum to the UK Russia Sanctions further confirms that the UK government have the right to review as required.

The UK government thus has effective discretion as to when the UK Russia Sanctions are reviewed, suspended or removed. UK Ministers are only legally required to remove the UK Russia Sanctions (or any specific provision therein) where those regulations are deemed non-compliant with the purposes under which UK Ministers are permitted to implement sanctions, such as “interests of national security” or “interests of peace and international security”.¹⁰  Given the broad criteria under which sanctions can be permissibly implemented, it remains questionable how the geopolitical situation would have to change before these criteria serve as a practical ground on which a review, suspension or revocation is seriously considered.

Timelines for Potential Repeal or Suspension

EU and UK processes for repeal or suspension of sanctions thus differ considerably. Whilst the UK government enjoys effective discretion to maintain, revoke, expand or amend the legislation at will, their EU counterparts are subject to greater procedural hurdles, owing to either the need to obtain unanimous consent (for a proactive decision to repeal / suspend) or the ambiguity which arises where a Council Decision lapses due to divided opinion.

Under EU procedure, the acquisition of such consent is generally an extended process (involving multiple negotiations and rounds of draft proposals) given the varying interests / priorities of member states and their individual positions with respect to geo-political affairs. In the event of a Council Decision’s controversial expiry, and the potential to nonetheless retain sanctions through the remaining Council Regulation, the EU would find itself in novel and unclear political and constitutional waters. The potential for such a situation, as well as the measures and timescales through which it may be resolved, is expected to continue to grow given the increase in the EU’s internal divisions.¹¹

Accordingly, even where the US, EU, and UK collectively de-escalate sanctions on Russia, readers should be mindful that the timeline and content of such changes may materially vary owing to their respective procedural systems.

Alternative Outcomes and Scenarios

Despite the prospect of a collective EU, UK, and US de-escalation of sanctions against Russia, readers should be mindful that the outcomes of this in-progress diplomacy remain far from clear. Though EU and UK powers have been pushed by US efforts to begin considering settlement terms themselves, there nonetheless remain apparent divides between the allied nations over the character of any deal and the longer-term position that should be taken with respect to Russia.

Among other recent disparities, for instance, the US has voted against EU and UK-backed United Nations (U.N.) resolutions (which characterise Russia as the “aggressor” in Ukraine) and successfully pushed through a UN Security Council resolution of their own (which France and the UK abstained from) calling for a “swift end” to the war. Speaking directly to the UK and EU nations, the US secretary of defence further stated that, as part of future security arrangements, “Europe must provide the overwhelming share of future lethal and non-lethal aid to Ukraine”.

With Europe, the UK and Ukraine absent from initial US–Russia discussions, and sufficiently concerned to consider developing their own diplomatic, political and defence positions independent of the US, there also arises the growing prospect of a significant divergence between the US, EU and UK sanctions regimes on Russia. In such a situation, a multitude of diverse regulatory scenarios could arise where the EU / UK and US regimes diverge. Among other outcomes, this could include:

• Partial termination of EU / UK sanctions – Under this scenario, ordinary commerce between the EU, UK and Russia could potentially resume for certain activities. However, the timelines, caveats, exemptions and licencing requirements may nonetheless vary between the EU / UK regime and that of their US counterparts, where the latter similarly opts to de-escalate. Notwithstanding any removal of legislative restrictions, companies may also find that existing agreements prohibit them from re-entering Russia, despite them being US / foreign companies that would not otherwise be subject to EU / UK sanctions, owing to prior market-standard commitments to ensure compliance with US, EU, and UK sanctions in relevant contracts. Commercial actors with operations across these jurisdictions would need to conduct careful case-by-case assessments of their potential Russia activity and pre-existing agreements (among other things) as a result.
• No change to EU / UK sanctions – Under this scenario, an immediate discrepancy would arise between the EU / UK regimes and that of their US counterparts, where the latter opts to de-escalate. Ordinary commerce between the US and Russia could technically resume in certain cases (likely subject to market sentiment about the stability of any settlement and future diplomatic relations, among other things) whilst the EU and UK would continue enforcing broad prohibitions on trade with Russia. This could pose significant complications for a variety of engagements. For instance, complex multiparty arrangements (particularly with respect to financing) will need to be carefully reviewed in this eventuality, as would the use by US operators of software, technology, servers or data centres that traverse EU / UK jurisdiction. Commercial actors with operations across these jurisdictions would need to be vigilant about the varying liabilities and risks associated with potential Russia activity as a result.
• EU / UK expands sanctions - Under this scenario, the EU / UK authorities could foster a more aggressive enforcement climate, impose further trade restrictions in respect of goods and activities, expand its list of asset freeze targets and /or expand / introduce extra-territorial burdens on EU / UK operators. Hypothetically, US operators could themselves become targets of EU / UK measures (e.g. subject to an asset freeze or indirectly constrained by extra-territorial obligations imposed on EU / UK parent companies or subsidiaries), particularly where they re-enter the Russian market under de-escalated US sanctions, though such actions would be politically controversial. Commercial actors with operations across these jurisdictions would need to be especially vigilant of varying liabilities and risks associated with potential Russia activity as a result.

Moreover, the EU and UK sanctions regimes may themselves diverge depending on how flexibility the UK decides to position itself between the EU and US powers in the event of a wider policy divergence vis Russia. In each case, multinational actors and global supply chains would be forced to navigate an increasingly complex regulatory landscape. Readers should standby for future client alerts discussing potential divergence scenarios and the commercial ramifications arising therefrom.

^{1 Readers should note that the EU and UK sanctions discussed in this alert refer to trade sanctions and asset freeze sanctions. Measures such as travel bans are excluded from the scope of analysis.} 

^{2 EU sanctions decisions and regulations are themselves divided into those which pertain to trade sanctions and asset freeze sanctions. The EU-Russia Council Decision for asset freeze sanctions is currently set to expire on 15 March 2025 whilst the EU-Russia Council Decision for trade sanctions is scheduled to expire on 31 July 2025. The corresponding council regulations are Council Regulation 269/2014 and Council Regulation 833/2014, respectively. Note that there are separate decisions and regulations relating to Belarus, Russia’s destabilizing activities targeting the EU, Russia’s internal repression activities targeting its civilians, Russia’s 2014 invasion of Crimea, the misappropriation of Ukrainian funds and human rights violations in Ukraine during the Orange Revolution, as well as certain occupied territories of Ukraine.}

^{3 Paragraph 34 and 35, EU Sanctions Guidelines.}

^{4 Article 215, TFEU; Article 31, TEU; and chapter II (Principles) para 7 of EU’s Sanctions Guidelines. A ‘qualified majority’ is defined in the TEU as “at least 55 % of the members of the Council, comprising at least fifteen of them and representing Member States comprising at least 65% of the population of the Union”.}

^{5 Some further details on the adoption process can be found in the Adoption and review procedure for EU sanctions.}

^{6 Paragraph 36, EU Sanctions Guidelines.}

^{7 Paragraph 37, EU Sanctions Guidelines.}

^{8 SAMLA formerly had a review mechanism in respect of sanctions implemented under its powers. However, the Economic Crime (Transparency and Enforcement) Act 2022 (s. 62) removed this periodic review and reporting obligation to “allow officials to focus efforts on targeting those who could harm the national interest”, and no formal mechanism exists any longer for the review of a given sanctions regime as such.}

^{9 s. 42 and 45, SAMLA.}

^{10 s. 1(2) and (3) SAMLA.}

^{11 Member States such as Hungary have repeatedly called for de-escalation, others such as Italy are keen to balance both their support for the US and Ukraine simultaneously, whilst nations such as Poland continue to maintain more confrontational stances. Across Europe, opposition parties at the member state level, in favour of normalising Russia relations, are also gaining in support and influence.}