The EU imposes a broad sanctions package following the forced landing of a Ryanair flight 782021 215

Historical background

The EU adopted its first economic sanctions against Belarus President Aleksandr Lukashenko and several senior Belarus officials in May 2006 in response to the repression of peaceful protests following his fraudulent re-election (he had already been in power for 12 years by then). Several persons and entities have been designated on the EU asset freeze list over the years in the light of severe human rights violations committed by his regime over the years.

On 25 February 2016, following the release of several political prisoners and in the context of improving EU-Belarus relations, the EU did not renew the existing restrictive measures.

The re-election of Aleksandr Lukashenko in August 2020 led to massive protests all over the country, which resulted in intimidation, arbitrary arrest and detention of political opponents and journalists. In response, the EU reimposed economic sanctions on several individuals and entities in the form of asset freeze and travel ban measures (including against Aleksandr Lukashenko who had been removed from the EU asset freeze list in late 2015). Several individuals and entities who support, or benefit from the support of, the Lukashenko regime have, since October 2020, been targeted for the ongoing violent repression and intimidation of peaceful demonstrators, opposition members and journalists.

On 23 May 2021, Belarusian armed forces diverted a Ryanair flight from Athens to Lithuania as it was about to leave Belarusian airspace, forcing it to land in Minsk escorted by a Belarusian military plane. The plane was rerouted by Belarusian authorities in order to apprehend the opposition journalist Roman Protasevich and his girlfriend Sofia Sapega who were on their way back to Lithuania.

This unlawful arrest, which occurred in the context of continuing attacks on human rights and fundamental freedoms, was unanimously condemned and led to several responses from key international actors including the EU, which adopted a gradual response.

A gradual response from the EU

As an immediate response, the European Council adopted on 4 June 2021 a ban on access to EU airspace and EU airports by Belarusian carriers of all kinds.

On 21 June 2021 the United States, the EU, Canada and the United Kingdom issued a joint statement expressing their "deep concern regarding the Lukashenko regime’s continuing attacks on human rights, fundamental freedoms and international law".

On the same day, the EU adopted a set of asset freeze measures and prohibitions on making funds or economic resources available, as well as travel bans, against 78 Belarusian individuals and 8 entities for their support of Belarus President, Aleksandr Lukashenko.

These asset freeze and travel ban measures were expanded on 24 June through the imposition of an ambitious set of sectorial economic sanctions targeting Belarus's main export industries and its access to EU financial markets – Council Regulation (EU) 2021/1030 of 24 June 2021 amending Regulation (EC) No. 765/2006 concerning restrictive measures in respect of Belarus (the Regulation). The Regulation:

• prohibits EU individuals / legal entities from selling, supplying, transferring and exporting to anyone in Belarus equipment, technology or software intended primarily for use in the monitoring or interception of the internet and of telephone communications. The provision of technical assistance, brokering services, financing and financial assistance in respect of such trades is also subject to restrictions.
• prohibits EU individuals / legal entities from selling, supplying, transferring and exporting to anyone in Belarus dual-use goods for military use or to a military end-user and to specified persons, entities or bodies in Belarus. The provision of technical assistance, brokering services, financing, financial assistance and insurance/re-insurance in relation to the trade in petroleum products is also subject to restrictions.
• prohibits EU individuals / legal entities from trading in petroleum products, potassium chloride ("potash") and goods used for the production or manufacturing of tobacco products. The provision of technical assistance, brokering services, financing, financial assistance and insurance/re-insurance in relation to the trade in petroleum products is also restricted.
• prohibits EU individuals / legal entities from providing insurance/reinsurance products to the Belarusian government and public agencies.
• restricts Belarusian entities' access to EU capital markets through restrictions on certain transferable securities, money-market instruments, new loans and credit with a maturity exceeding 90 days issued after 29 June 2021 by the Belarusian government, public bodies and listed state-owned banks.

These sectorial economic sanctions adopted against Belarus are similar in nature to those adopted in 2014 following Russia's annexation of Crimea, as key sectors of the Belarusian economy are targeted specifically by these restrictive measures.

In addition to these targeted economic sanctions, the Regulation also calls for specific prohibitions in relation to development banks. The European Investment Bank is as such prevented from making any disbursement or payment in furtherance of any existing agreement in relation to (i) projects in the public sector or (ii) technical assistance service contracts. EU Member States must also ensure they take steps to limit the involvement of Belarus in multilateral development banks they are members of.

What does this mean for EU companies?

EU individuals / legal entities doing business with Belarus should proceed with caution and impose a higher level of scrutiny in their dealings involving Belarusian entities.

As such, in dealing with Belarusian counterparts, EU persons/entities should:

1. ensure their Belarusian counterparts are not directly listed on the EU asset freeze list;
2. ensure their Belarusian counterparts are not more than 50 per cent owned or controlled by an individual / legal entity listed on the EU asset freeze list. However, since the current structure of the local Belarusian economy revolves around key individuals closely associated with President Lukashenko, this more than 50 per cent ownership or control rule is likely to have a significant impact on the volume of indirectly targeted companies within the Belarusian economy; and
3. determine before any operation/transaction with Belarusian counterparts whether the operation/transaction falls within one of the restricted sectors. In the event that it does, EU entities should conduct a thorough analysis to determine whether or not the operation/transaction infringes the provisions of the Regulation.

Authors: Olivier Dorgans, Partner; Paul Charlot, Senior Associate