The European Union is set to approve a ban on the sale to Russia of luxury goods worth more than 300 euros ($329.58), as well as the purchase of many Russian steel products and iron as part of the fourth round of sanctions regarding the invasion of Ukraine, according to a draft obtained by Bloomberg.
European diplomats on Monday announced the tougher measures, which also include a ban on new investment in Russian energy projects, after several days of debate behind closed doors. They could be formally adopted as early as Tuesday morning.
The bloc bans the sale of luxury cars, boats and planes worth more than 50,000 euros, which would apply to models from several European car brands, including Audi, BMW, Mercedes, Ferrari and Porsche. It also covers motorcycles worth more than 5,000 euros, as well as parts and accessories. Many European automakers have already voluntarily suspended sales to Russia. The package also blocks Russia’s access to credit rating services.
The EU is also set to sanction the wealthiest Russians and join its allies in backing a campaign to scrap Russia’s most favored nation status at the World Trade Organization. The WTO’s most-favoured-nation principle of non-discrimination requires its members to offer the same tariff rates equally to all 164 members of the organization, making it a fundamental principle of the WTO and an essential reason for the participation of nations.
The new sanctions package includes some exemptions, notably related to energy and metals. For example, it will not prohibit transactions necessary to purchase or transport Russian fossil fuels. It also exempts titanium, aluminum, copper, nickel, palladium and iron ore from the restrictions.
While most finished Russian steel products are included in the sanctions, precursors such as slabs and billets are not. Many EU factories depend on Russian exports for these materials and would struggle to replace them if the country’s supplies were limited.
Still, the measures will serve to further tighten the EU steel market which is already suffering from the loss of Ukrainian shipments. Russia supplies about a fifth of the bloc’s steel imports.
Monday’s closed-door debate between EU ambassadors was sharply divided, according to a person familiar with the meeting. Poland and the Baltics pushed for a tougher set of sanctions, but countries led by Germany managed to exclude a number of valuable products from the EU list, the person said.
With regard to luxury goods, the ban applies to the sale of certain products with a value of more than 300 euros per item to anyone in Russia or intended for use in Russia. The list of restricted items includes caviar, truffles, beer, champagne, cigars, perfumes, handbags, leather and fur clothing, overcoats, suits, shoes, shirts and others matching clothes, pearls, diamonds, gold and precious stones.
The EU export ban targets a list of nearly 400 categories of European exports to Russia worth around $25 billion a year, according to Bloomberg calculations based on Center data of international trade.
The most valuable EU exports on the list include cars and parts, computers, machinery, smartphones, turbojets, makeup, women’s clothing, wine, spirits, footwear and leather bags.
The level at which to set the threshold has been the subject of much debate among member states, with lobby groups pushing several governments to agree on high values, separate documents seen by Bloomberg show. The catch-all threshold of 300 euros means that certain categories will mostly be spared the ban.
As with previous trade sanctions imposed on Russia, existing contracts are shielded from some of the measures included in this package, with implementation dates being delayed by several months.
Some movements have more symbolic weight than economic bite. For example, Russia accounts for around 2% of global sales of major European luxury vehicle brands, and robust global demand could offset lower exports to Russia, according to Bloomberg Intelligence.
Mercedes, BMW and Porsche and Audi’s parent company, Volkswagen AG, have already announced that they will stop exporting to Russia earlier this month.