New package of EU sanctions on Russia: what is the impact?

First train crossing the Nizhneleninskoye-Tongjiang bridge. Image: Telegram. Russian Railways

On February 25, the European Union issued the 10th package of sanctions against Russia. What could possible impact rail freight between China and Europe is the prohibition to transit dual-use goods and firearms via the territory of Russia to third countries. Our sister publication interviewed legal experts and industry experts to understand what the impact could be.

The new prohibition has made many industry people nervous, but taking it out of context could easily cause panic. A more objective and comprehensive answer may be needed. Therefore, we asked a sanction lawyer to interpret the new rules. But before we get there, it is important to define the term dual-use goods.

Dual use goods

According to Dow Jones, dual-use goods refer to items that can be used for both civilian and military purposes, and such civilian items can also be converted to military uses, such as specific chemicals. Specifically, dual-use items include global positioning satellites, missiles, chemical and biological technologies, certain drones, precise specifications of aluminum tubing, or certain ball bearings.

Thus, the definition of dual-use goods is relatively broad, and whether a commodity falls in this category needs to be judged on a case-to-case basis.

Only export

The interpretation of the text was done by sanction lawyer Sebastiaan Bennink of the Dutch office BenninkAmar. He mentioned that the prohibition to ship dual-use goods though Russia to a third country will be limited to eastbound exports. The original text of the sanctions is as follows:

“Furthermore, in order to minimise the risk of circumvention of the restrictive measures, decision (CFSP) 2023/434 prohibits the transit via the territory of Russia of dual-use goods and technology and of arms exported from the Union.”

The products

In view of the fact that the eastbound cargo flow of China Railway Express is much smaller than the westbound cargo flow all year round, the impact on westbound cargo owners will not be obvious. And some specific goods subject to sanctions in the eastbound direction, such as some aluminum tube bearings and specific chemicals, may also see a decline in volume in the future.

However, it is worth mentioning that the westward demand for chemicals has risen. Zhang Qianyi, a political and economic strategist of GEODIS, said in a study released last year : due to the European energy crisis last year, chemical transportation soared, and even showed a year-on-year growth 77 per cent of the data.

Zhang Qianyi’s research also mentioned that the main force in the eastward supply of goods last year was milk powder. In the context of the tenth edition of the sanctions, the shipment of this category will not be affected much.

Wait and see also interviewed two logistics specialists in Italy and Poland, who explained the impact of the current new sanctions policy on their business. Mieszko Strugala, the business development manager of Polish freight forwarder Jakub Radola, said that he has not seen the actual impact of the sanctions on China Railway Express. The in-transit boxes arrived in Europe smoothly, and at the same time, after the sanctions were issued, we received information about the order and the box shipped by the Chinese freight forwarder.

Grace Wang, the business director of Italian freight forwarder SIIE, also said that they have not seen a big actual impact so far. The concept of dual-use cargo is too broad, and they are still waiting to see the first impacts.

Author: Chengfan Zhao

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