Author - Akhmad Umarov, Member of the Sanctions Risk Committee of Compliance and Business Ethics Association, Senior Risk & Sanction Manager Kazmortransflot LLP
Time to read - 4,5 min
Introduction
On the third anniversary of Russia’s invasion of Ukraine, the EU unveiled its 16th sanctions package (adopted 24 February 2025) targeting Russia and its allies. This comprehensive package adds new trade bans and financial restrictions, but it also refines and, in some cases, narrows the exemptions that businesses can rely on to continue certain activities legally. Notably, the latest measures were implemented through Council Regulation (EU) 2025/395 (amending the main Russia sanctions Regulation 833/2014), as well as Council Regulations (EU) 2025/398 and 2025/401, which update sanctions on the Russian-occupied regions of Ukraine (Donetsk/Luhansk/Kherson/Zaporizhzhia areas and Crimea/Sevastopol, respectively).
This article examines key industry-relevant exemptions and carve-outs in Council Regulation (EU) 2025/395, illustrating how companies and sectors might leverage them in practice. The focus is on transitional allowances and licensing derogations that can help businesses adapt to the tightened sanctions regime without breaching EU law.
Transitional Import Quotas for Russian Aluminium
One of the headline measures in Council Regulation 2025/395 is a gradual ban on imports of Russian primary aluminium, a critical metal for automotive, aerospace, packaging, and construction industries. To avoid supply shocks, the EU introduced a phase-in period accompanied by quota-based exemptions. For the next 12 months, EU buyers may import up to 275,000 tons of primary aluminium from Russia under a quota system, covering roughly 80% of the EU’s 2024 import volume. This grace period, lasting until 26 February 2026, gives manufacturers time to secure alternative suppliers while maintaining production. After the full ban takes effect in 2026, a further limited exemption allows companies to honor pre-existing contracts (signed before Feb 2025) for an additional 50,000 tons of Russian aluminum imports through the end of 2026.
For example, a European packaging firm or car parts manufacturer with a long-term supply contract from a Russian smelter (such as Rusal’s operations) can utilize these quotas to gradually wind down purchases instead of facing an abrupt cutoff.
Tightened Export Controls – Few Exemptions for Dual-Use Goods
On the export side, Regulation 2025/395 further restricts sales of high-tech and dual-use goods to Russia, but it leaves only narrow carve-outs that businesses must understand. The 16th package expanded the list of controlled items (adding certain chemical precursors, CNC machine tool software, drone controller components, and chromium compounds) that could aid Russia’s military. Crucially, it tightened or removed previous licensing exemptions for dual-use and mass-market technology exports. In earlier packages, some mass-market IT equipment or software updates were implicitly allowed under general exemptions, but now even those require specific licenses or notifications, closing a loophole that some tech firms had relied on. Essentially, only medical and health-related exports remain broadly exempted among dual-use items, and even then only if they are not on the “high priority” military-use list.
For instance, an UAE based pharmaceutical equipment supplier can still ship certain medical devices or software updates for hospital equipment to Russia, but a general electronics manufacturer can no longer freely export “mass market” IT hardware without scrutiny.
Financial Sector Derogations – Wind-Down and Fund Recovery Permissions
The sanctions package also added new financial prohibitions, notably extending the ban on transactions with certain Russian banks and the Russian alternative payment system (SPFS). However, the EU included targeted derogations to help businesses wind down operations and retrieve funds caught in the sanctions net. Council Regulation 2025/395 designates additional banks (e.g. Bank BelVEB, Belgazprombank, VTB’s Shanghai branch) for a transaction ban due to their role in sanctions evasion, but it explicitly allows exceptions for transactions “necessary for the repayment of guarantees granted by an EU Member State, for divestment from Russia, or the wind-down of business activities in Russia, or the execution of certain contracts”. In practice, this means an EU company exiting the Russian market or terminating a joint venture can still engage in otherwise-prohibited dealings with these listed banks if it’s strictly to close out its business – for example, transferring proceeds from the sale of a Russian subsidiary or repaying a state-backed loan. Such carve-outs are critical for firms that need a legal path to disengage from Russia’s economy without breaching sanctions. Additionally, the new rules amend existing licensing grounds to release frozen funds in specific scenarios.
As an example, a French company exiting Russia can still conduct transactions with newly sanctioned banks (e.g., VTB’s Shanghai branch, Belgazprombank) if strictly necessary for business wind-down, divestment, or repaying state-backed loans. For example, a firm selling its Russian subsidiary may transfer proceeds despite the bank's designation. Additionally, if company funds were frozen mid-transfer due to a sanctioned bank’s involvement, the firm can apply for authorization to recover them, preventing undue financial loss.
Energy Trade and Transport: Narrow Exceptions Preserve “Essential” Flows
The 16th package also revisited sanctions on Russia’s energy sector and transport links, introducing new bans but with selective exceptions important to certain industries. One notable change was the removal of a prior exemption that allowed Russian oil to be stored or transit through EU ports if it complied with the G7 price cap. Under earlier rules, European logistics and storage firms could handle Russian crude or petroleum products destined for third countries as long as the oil was purchased below the price cap, but now even temporary storage or free-zone handling of Russian oil in EU ports is completely prohibited. This tightening closes a loophole that traders and port operators had used to facilitate oil flows via Europe.
At the same time, the Council introduced a de facto derogation allowing continued imports of Russian LNG through certain terminals: specifically, LNG deliveries to EU import terminals that are integrated into the broader European gas network remain permitted, whereas only isolated terminals not connected to the common pipeline system are now off-limits.
Oil Storage Ban Impact
For instance, a Rotterdam-based logistics company used to store Russian crude oil in its port facilities before it was shipped to buyers in Asia and Africa. Previously, this was legal as long as the oil was sold under the G7 price cap. Now, under the 16th sanctions package, all storage and transit of Russian oil in EU ports is completely banned. As a result, the company must immediately stop accepting Russian crude, terminate existing contracts, and adjust its operations to avoid sanctions violations.
LNG Import Exemption in Practice
Meanwhile, a Spanish energy provider relies on Russian LNG to fuel its gas-fired power plants. Since its import terminal is connected to the EU-wide gas grid, it can continue receiving Russian LNG under the new rules. However, if this company operated a smaller, isolated LNG terminal without EU pipeline access, it would now be prohibited from importing Russian LNG, forcing it to secure alternative suppliers or shut down operations at that site.
Shipping and logistics companies should be aware that any dealings with the five newly listed ports (Astrakhan, Makhachkala, Ust-Luga, Primorsk, Novorossiysk) or the specified Russian airports now require careful vetting, and only narrowly defined activities. Following activities are exempted from transaction ban:
- 1. Unloading and re-exporting non-Russian origin crude oil via Astrakhan/Makhachkala/Ust-Luga, Primorsk/Novorossiysk for transit via Russian Territory
- 2. Pipeline transfers from Makhachkala to the Black Sea via Novorossiysk, if they involve non-Russian origin crude.
- 3. To qualify for an exemption, companies must ensure:
- - The oil is exclusively non-russian-origin and not mixed with Russian crude.
- - Transactions do not benefit sanctioned Russian entities.
- - All shipping and trade documents clearly verify the source of the oil.
- - The final consignee is not a Russian resident.
Example: A Kazakh oil company exporting crude via Makhachkala to Novorossiysk can still legally operate under an EU energy security exemption, provided the oil is certified Kazakh-origin and does not involve Russian ownership or benefit sanctioned Russian entities.
- 4. Crude oil and gas transit via Ust-Luga or Novorossiysk if covered under pre-existing derogations (e.g., pipeline oil for landlocked EU countries)
A Hungarian energy company relying on crude oil imports via the Druzhba pipeline can continue limited transactions with a sanctioned Russian port under an EU energy exemption.
- 5. Emergency port calls for ships in distress (e.g., mechanical failure, weather conditions), environmental or maritime safety operations, such as oil spill containment or ship rescue efforts.
A European-flagged vessel suffers engine failure near Novorossiysk and is granted emergency docking rights for repairs under an exemption approved by the relevant national authority.
Conclusion
The EU’s 16th sanctions package underscores a two-sided strategy: racheting up economic pressure on Russia and its occupied territories, while carving out limited exemptions to protect EU interests and legal trade where necessary.
Businesses operating internationally must carefully navigate these nuances. Key industries – from metals importers to high-tech exporters – have been given temporary lifelines such as quota-limited imports and extended compliance deadlines, but previously broad exclusions (for example, on certain tech exports or use of EU infrastructure for Russian oil) have been narrowed or eliminated.
The inclusion of wind-down derogations and specific licensing allowances (for contracts predating the sanctions or essential transactions) reflects a practical recognition that European companies need channels to disengage from Russia in an orderly fashion.
At the same time, the tightening of “already limited exemptions” signals that each loophole is being closed once its purpose (e.g. a humanitarian need or transition period) is served. For professionals and sanctions lawyers, the takeaway is clear: each sanctions package not only adds new prohibitions but also recalibrates the exceptions.
Companies that can leverage these exemptions – such as an auto manufacturer utilizing the aluminium import quota or a bank extracting frozen funds with permission – stand to minimize disruption while remaining compliant.