EU set to ban sale to Russia of luxury goods worth more than 300 euros

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The European Union is about to approve the ban on the sale to Russia of luxury goods worth more than 300 euros, as well as the purchase of many Russian steel and iron products within the framework of a fourth round of sanctions against invading 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, 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, as well as parts and accessories. Many European automakers have already voluntarily suspended sales to Russia.

The new sanctions package includes certain exemptions, notably related to energy. 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.

Steel imports

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.

With regard to luxury goods, the ban applies to the sale of certain products with a value of more than €300 per item to anyone in Russia or 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 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 means 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, Porsche and Audi’s parent company, Volkswagen AG, have already announced that they will stop exporting to Russia earlier this month.

–Bloomberg

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