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New UK, EU and US Sanctions on Russia and Belarus update as of 1 November 2022

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New UK, EU and US Sanctions on Russia and Belarus update as of 1 November 2022

With the rapid expansion of UK, EU and US sanctions on Russia and Belarus in recent weeks – and with more in the regulatory pipeline we set out:

  1. What’s New This Week (to 1 November)
  2. A 5-step checklist for assessing how your activities may be affected
  3. A Sanctions Summary

Request our overview of new UK, EU and US sanctions on Russia and Belarus.

WHAT’S NEW THIS WEEK 

​UK

  • On 29 October 2022, new UK measures came into force.  The Russia (Sanctions) (EU Exit) (Amendment) (No. 15) Regulations 2022 are now all in effect with the exception of the provisions relating to a ban on the import of liquefied natural gas (“LNG“). The prohibition on LNG set out under regulation 6 will enter into force on 1 January 2023. 
  • As regards trade sanctions, the new Regulations:
    • Prohibit the export, supply and delivery, and making available of goods (as well as related services) to / for use in Russia that are critical to the functioning of Russia’s economy, in particular the manufacturing sector. The prohibited goods will form the new “Russia Vulnerable Goods” list.
    • Add to the G7 Dependency and Further Goods list by imposing additional bans on the export, supply and delivery, and making available of products (as well as related services) to / for use in Russia. This aims to further align UK and EU prohibitions, including on oil refining technology and manufacturing products.
    • Prohibit the import of LNG which is consigned from or originates in Russia, and the acquisition of LNG (as well as related services) which originates or is located in Russia, with the intention of the LNG entering the UK. As above, this measure will be brought into force on 1 January 2023.
    • Expand the list of revenue generating goods included in Schedule 3D to align with the EU on two Russian product groups: beverages, spirits and vinegar (including vodka); and food waste products (primarily beet pulp).
    • Prohibit the import of gold (as well as related services) which has been processed in a third country and incorporates gold that, on or after 21 July 2022, originated in Russia and has been exported from Russia.
    • Prohibit the import of gold jewellery that has been exported from Russia and the acquisition of gold jewellery that originates and is located in Russia with the intention of that jewellery entering the UK, or that originates in Russia and has been exported from Russia with the intention of that jewellery entering the UK. Related services are also banned.
  • As regards loan and credit arrangements, the new Regulations:
    • Amend the loan and credit arrangements ban to bring companies outside Russia owned by a person connected with Russia into scope, including UK companies. In doing so, it creates a ‘category 5 loan’ and phases out the existing category of loan to cover any loans made during the period between the original amendment regulations coming into force and this amendment being made.
    • Amend the 2019 Regulations to provide for exceptions from these measures, additional licensing criteria and minor changes to definitions.
  • On 28 October 2022, OFSI issued two General Licences (“GLs“) on “category 5 loans” under Russia sanctions to accompany the latest Regulations described above.
    • The first – INT/2022/ 2305324, “Securing Energy for Europe” – authorises until 29 October 2023 a person or entity to grant a category 5 loan or enter into an arrangement to grant such a loan to Gazprom Germania GmbH (aka Securing Energy for Europe GmbH) and / or any of its subsidiaries, or carry out any activity necessary to effect this, including but not limited to loans for a select set of purposes;
    • The second – INT/2022/2307324, “Loans and Securities amendment” – authorises until 5 November 2022 a person or entity to grant a category 5 loan and Relevant UK Institutions to process payments in accordance with this permission.  The GL does not authorise activity that it otherwise authorised by INT/2022/ 2305324 (above).
  • On 28 October 2022, OFSI also issued a new UK GL related to Russia and Belarus legal fees.  GL INT/2022/2252300 authorises until 28 April 2023 the payment of legal fees by people and entities designated under the Russia or Belarus sanctions regimes to law firms and counsel.
    • The GL distinguishes between legal fees ‘pre-designation’ (Part A) and ‘post-designation’ (Part B), each capped at £500,000 (including VAT).
    • Where applicable, these two caps can also be combined.  For any fees above these caps, a specific licence must be sought.
    • Those who use the licence must provide a report to OFSI when their use of the GL has ended, or upon expiry of the GL for work paid for under the GL.
    • Those using the GL must keep records of its use for 6 years.
    • Hourly rate caps (excluding VAT) for legal advisers are set out in the GL and the hourly rate cap for counsel is £1,500 per hour (inc. VAT).
    • There is a cap on the expenses associated with the provision of legal services (e.g. fees for expert witnesses, translation, printing etc.) which is 5% of legal fees per derogation (up to £25,000 for each derogation).

USA

  • On 26 October 2022, the US designated nine people and twelve entities in connection with corruption and Russia’s influence and destabilising campaigns in Moldova.  Former Moldovan government official Vladimir Plahotniuc has been listed by OFAC under Global Magnitsky sanctions for being responsible for / complicit in corruption, including by bribing law enforcement officials, directing investigations to target his political and business rivals, interfering in elections and engaging in corruption arrangements with government officials. The US Department of State imposed a travel ban on Mr Plahotniuc in January 2020.  Moldovan politician Ilan Mironovich Shor has also been designated alongside his wife Sara Lvovna Shor and political party for his alleged role in a scheme to undermine Moldovan president Maia Sandu and return Moldova to Russia’s sphere of influence.

EU

  • The EU Commission updated its FAQs: 
  • Asset freezes, FAQ 15: “What measure (if any) should competent authorities adopt in respect of listed shareholders with qualifying holdings in an EU bank? Is the freezing of voting rights appropriate/required? In that case, should a proportionality approach be applied, e.g. by starting with increased monitoring of governance?” An expanded response makes clear shares qualify as ‘funds’ and therefore must be frozen,  and that it is prohibited for the listed person to exercise any voting rights which could lead to any change in relation to these shares. Voting rights can be considered an intangible economic resource so they should be frozen;
  • Central securities depositories: the Commission provides a detailed response to new FAQ 22, “Is it possible to convert Depositary Receipts (DR) of Russian issuers into the underlying shares?”
  • Provision of services: the FAQs on the provision of services (previously ‘business services’) have been updated to correct drafting errors.

2.         YOUR 5-STEP CHECKLIST

1. Which countries’ sanctions apply to your activities?

The UK, EU, US and other countries’ sanctions typically must be observed by:

  • their nationals, wherever they are in the world;
  • all business done, in whole or in part, within their territory or airspace; and
  • all legal entities incorporated or constituted under their law, including foreign branches.

Additionally, US sanctions may apply to non-US persons outside the US if a transaction:

  • involves a ‘US nexus’ e.g. a transaction is conducted in US dollars (or needs to clear through the US financial system) or data is routed through servers in the US;
  • with certain US-sanctioned persons or industries is deemed to be ‘significant’ or to constitute the provision of ‘material support’ (secondary sanctions); or
  • involves the supply to certain organisations (on the US Entity List) of any US-origin items and certain non-US items incorporating US components or technology.

UK sanctions may also apply to non-UK persons outside the UK if there is a sufficient nexus.  This will depend on the facts of each case but could include, for example, transactions using clearing services in the UK, actions by a local subsidiary of a UK company; actions directed from within the UK; and/or financial products or insurance bought on UK markets but held or used overseas.

2. Are any of your business partners subject to an asset freeze?

The UK, EU, US and others are adding a growing number of Russian and Belarussian individuals and organisations to their national lists of those subject to an asset freeze (‘blocked’ in US terms). This generally requires those within the scope of the national sanctions, as described above:

  • to freeze any assets of the designated parties that they may hold and to report these to their authorities;
  • not to make any funds or economic resources available to them, directly, indirectly or for their benefit;
  • US restrictions go further, in effect also prohibiting all transactions with the designated party.

The same restrictions also apply to any non-designated entity that is:

  1. ‘owned’ by a designated party or parties. The US threshold is 50% or more, while the UK and EU thresholds are ‘more than 50%’. The US and recently the EU (in updated guidance) consider the criterion met if the aggregated ownership of two or more designated parties exceeds the threshold. The UK (also in updated guidance) recognises aggregated ownership only if there is evidence of a joint arrangement between two or more designated parties; or
  2. (in the UK/EU, not the US) ‘controlled’ by a designated entity (i.e. able to ensure the affairs of the undesignated entity are conducted in accordance with their wishes, for example through controlling a majority of voting shares or having the right to appoint or remove a majority of the board of directors).
     
    You should screen your business partners – banks, suppliers, customers, distributors – against the applicable national sanctions lists and, given the current rapid pace of developments, set up alerts for new designations if you do business with Russia or Belarus, in order to be able to identify any relevant new sanctions measures without delay. In some instances, the measures include general licences that provide for a wind-down period but other may have immediate effect.
     
    Asset freezes on Russian banks may prevent you from receiving or making payments to business partners or to employees; if necessary, consider work-arounds to facilitate the payments.

3. Are any of your activities affected by other financial sanctions?

Short of an asset freeze, sanctions measures may restrict or prohibit:

  • granting new loans or credit (including payment terms);
  • sanctioned banks from clearing payments in certain currencies;
  • dealing in transferable securities and money market instruments issued by sanctioned parties;
  • the size of bank deposits by nationals of sanctioned countries;
  • the access of sanctioned banks to the SWIFT messaging systems.

The screening of your business partners, including banks, should check for the application of any of these restrictions.

4. Are your products or services restricted?

 Trade sanctions may restrict or prohibit:

  • the sale, supply, transfer or export to Russia/Belarus, directly or indirectly, of certain goods and technology beyond those that are normally subject to export controls. This generally includes related financial services, brokering and technical assistance (e.g. repair, maintenance). The restrictions may be focused on only certain designated entities. There may be exceptions, grounds for licensing and wind-down periods;
  • closure or airspace and ports to aircraft and ships;
  • more wide-ranging embargoes on most finance and trade with certain regions (previously Crimea, now extended to the separatist regions of Donetsk and Luhansk).

5. What, if anything, do your contracts say?

If new sanctions affect the performance of your contract, does the contract enable you (or the counterparty) to suspend or terminate it without liability or serious risk of challenge, whether through a specific sanctions provision or other clauses such as the material adverse change clause?

3.         YOUR SANCTIONS SUMMARY

We set out below a high-level overview of the latest UK, EU and US sanctions.

UNITED KINGDOM

The UK has announced various new sanctions related to Russia’s invasion of Ukraine which it has not yet implemented, including:

  • a coordinated ban with the G7 on insuring ships carrying Russian oil. Subject to finalising the details of the implementation of a price cap, this appears likely to be introduced with effect from the same dates as the EU’s oil import ban (5 December 2022 for crude oil and 5 February 2023 for refined products), exempting cargoes that meet the price cap;
  • a ban on accessing UK trusts services;
  • bans on the provisions of certain services: IT consultancy, including designing IT systems and software applications; architectural; engineering; advertising; auditing; and transactional legal advisory services (to cover “certain commercial and transactional services and hamper Russia’s businesses’ ability to operate internationally”); and
  • the suspension of the process by which actions taken to manage the orderly failure of Russian banks are recognised under the laws of the UK, in cases where the bank is a sanctioned entity.

 Asset freezes:

  • Banks include: VTB; Credit Bank of Moscow; PJSC Sberbank; VEB.RF; Bank Otkritie; Financial Corporation PJSC; SovComBank; Bank Rossiya; IS Bank; GenBank; Promsvyazbank; Alfa-Bank; Gazprombank; Russian Agricultural Bank; Ural Bank for Reconstruction and Development; SMP Bank; the Black Sea Bank for Development and Reconstruction; and Rosbank (through its ownership/control by designated person Potanin);
  • General Licences provide for the wind-down of certain transactions involving: energy-related payments through Sberbank; payments related to the insolvency of VTB’s UK subsidiary; payments for basic needs, bank fees and legal services by VTB Capital plc, Sberbank CIB (UK) Ltd and their UK, and certain Guernsey and European subsidiaries until 3 April 2023; allowing for the continuation of business operations of Evraz’s North American subsidiaries until 31 March 2023; certain payments in relation to travel by rail or air originating in, or within, Russia; certain payments by Amsterdam Trade Bank N.V. until 12 May 2023; certain payments until 30 May 2023 by and to charities linked to a person/entity listed on the UK’s Russia sanctions list; transactions related to the continuation of business operations involving ZAO TransTeleCom Company and news media services until 30 May 2024; authorising humanitarian activities; allowing certain insurance payments to be paid and received from frozen bank accounts; payments related to energy supplies to Mongolia; allowing banks to take payment of bank fees from frozen accounts; allowing Crown Servants and their family members to carry out sanctioned activities in their personal capacity; permitting designated persons to pay insurance premiums and broker commissions for insurance cover of UK properties; authorising until 29 October 2023 loans to Gazprom Germania GmbH; and authorising until 28 April 2023 the payment of legal fees by designated persons;
  • Entities in strategic sectors notably defence, transport, research, media and aerospace including: UralVagonZavod; United Aircraft Corporation; United Shipbuilding Corporation; Rostec; the Wagner Group; Russian Railways; SOVCOMFLOT; TV-Novosti; and Aeroflot;
  • Individuals include: President Putin, Foreign Minister Lavrov, Ministers and senior officials, the head of the Russian Orthodox Church, various members of the Russian State Duma, oligarchs and members of their families, and senior directors of large state-owned corporations; and
  • The UK government is establishing an Oligarch Taskforce to coordinate work to sanction oligarchs.

Financial services:

  • A ban on dealing with transferable securities and money market instruments or issuing new loans or credit to, with a maturity exceeding 30 days:
    • issued since 2014: an entity listed in Schedule 2 (including Sberbank, VTB Bank, Gazprombank, and VEB) or their non-UK subsidiaries;
    • issued since 1 March 2022: UK subsidiaries of Schedule 2 entities; a “person connected with Russia” or an entity owned by or acting on behalf/at the direction of such as person; or the Government of Russia (i.e. Russian sovereign debt);
  • A ban on UK credit or financial institutions from establishing or continuing a correspondent banking relationship, and from processing sterling payments to, from or via a designated person or a credit or financial institution owned or controlled by them. The General Licence has been amended to authorise UK credit/financial institutions to continue a correspondent banking relationship with Sberbank or a UK or non-UK credit or financial institution which is owned or controlled directly or indirectly by Sberbank;
  • A ban on loans and credit including to companies outside Russia owned by a person connected with Russia, including UK companies;
  • The UK financial regulatory authorities released a Joint Statement on 11 March 2022 to reiterate that the cryptoasset sector must comply with sanctions and circumventing sanctions through cryptoassets is a criminal offence;
  • A ban on financial services for foreign exchange reserve and asset management to the Central Bank of the Russian Federation, the Russian National Wealth Fund and the Ministry of Finance, and persons owned or controlled directly or indirectly by them or acting on their behalf or direction;
  • (To come) restrictions to cut off wealthy Russians’ access to UK banks including a £50,000 limits on bank accounts;
  • A ban on:
    • the direct acquisition of any ownership interest in Russian land and entities connected with Russia;
    • indirect acquisition of any ownership interest in Russian land and entities connected with Russia for the purpose of making funds or economic resources available (directly or indirectly) to, or for the benefit of, persons connected with Russia;
    • direct or indirect acquisition of any ownership interest in entities with a place of business in Russia (which are not persons connected with Russia) for the purpose of making funds or economic resources available (directly or indirectly) to, or for the benefit of, persons connected with Russia;
    • establishing joint ventures with a person connected with Russia;
    • opening representative offices and establishing branches and subsidiaries in Russia; and
    • providing investment services directly related to the above;
  • Selected Russian banks removed from the SWIFT messaging system; and
  • A ban on the export to, or for use in, Russia, of sterling or EU denominated banknotes; as well as prohibitions on the making available, supply, or delivery of such banknotes to a person connected with Russia; and on the making available of such banknotes for use in Russia.
  • N.B. As of 30 August 2022, regulations now extend certain financial sanctions reporting obligations to cryptoasset exchange providers and custodian wallet providers.

Trade:

  • A ban on all Russia-owned or operated aircraft from UK airspace and landings, and on all Russia-owned or operated ships from UK ports;
  • A ban on the export, supply and delivery, and making available of goods (as well as related services) to / for use in Russia that are critical to the functioning of Russia’s economy, in particular the manufacturing sector, as listed in the “Russia Vulnerable Goods” list;
  • A ban on the sale, supply, transfer and export, to or for use in Russia, of all dual-use items and of a list of ‘critical industry’ goods and technology (similar to equivalent lists in the US and EU covering certain electronics, computers, telecommunications equipment and information security, sensors and lasers, marine-related items, aerospace and propulsion, quantum computing and advanced materials, internal repression, and the production of chemical and biological weapons), and related financial and technical services, with limited exceptions;
  • Similar bans apply to energy-related items and services (mainly related to oil production and oil refining, including gas liquefaction), infrastructure-related items and services; and aviation and space items and services. A General Licence permits certain vessels controlled under 8A992f, and related technology and services, to move to or from Russia with no change of ownership or operator;
  • From 1 January 2023, a ban on the import of LNG which is consigned from or originates in Russia, and the acquisition of LNG (as well as related services) which originates or is located in Russia;
  • A ban on the provision of aviation and shipping technical assistance to, or for the benefit of, designated people/entities. A general licence permits the provision of such services in specified circumstances, including the provision of insurance and reinsurance;
  • A ban on the export, supply and making available of maritime goods and technology for Russian-flagged vessels;
  • A ban on most finance, shipping and trade with the non-government controlled areas of Ukraine, (including Crimea), with exceptions in certain situations for obligations under a contract concluded, in respect of Donetsk and Luhansk, before 23 February 2022, and for humanitarian assistance;
  • Denial of Most Favoured Nation treatment for key imports originating in Russia and Belarus, including vodka and antiques, and imposing a 35% tariff on specified products;
  • A ban on the sale, supply, transfer and export, to or for use in Russia of luxury goods;
  • A ban on the import or acquisition of iron and steel products from Russia and on the provision of related technical assistance, and financial services, funds, and brokering services;
  • A ban on the import, acquisition or supply and delivery of a list of revenue generating goods that originate in or are consigned from Russia – including inter alia spirits e.g. vodka and food waste products e.g. beet pulp – as well as related technical assistance, financial services, funds, and brokering services;
  • A ban on the export to, or for use in Russia of jet fuel and fuel additives, as well as prohibitions on the making available, export, and supply, directly or indirectly, of such products to Russia or for use in Russia as well as related technical assistance, financial services, funds, and brokering services;
  • A ban on the export, supply and delivery, and making available of items listed on the G7 Dependencies and Further Goods List to, or for use in Russia, as well as related services, including certain chemicals, materials, machinery goods and electrical appliances;
  • A ban on the export of energy-related goods to Russia or persons connected with Russia, and providing energy-related services to all oil and gas exploration and production projects in Russia;
  • A ban on the provision of accounting, business and management consulting, and public relations services to persons connected with Russia;
  • A ban on the import, acquisition and supply or delivery of oil and oil products (from 31 December 2022) and coal and coal products (from 10 August 2022) that originate in or are consigned from Russia, as well as prohibitions on the provision of related services;
  • A ban on the import, acquisition or supply and delivery of gold that originates in Russia as well as ancillary services, including gold processed in a third country and that incorporates gold that, on or after 21 July 2022, originated in Russia and had initially been exported from Russia; N.B. this ban also extends to gold jewellery products originating in Russia;
  • A formal exchange of letters to liberalise all tariffs on imports from Ukraine under the UK-Ukraine Free Trade Agreement; and
  • Social media, internet services and app stores are required to block content from RT and Sputnik.

Belarus

  • Asset freezes on Ministers Andrei Burdyko, Victor Gulevich, Sergei Simonenko and Andrey Zhuk and on several entities in strategic sectors such as defence, transport, and finance;
  • A General Licence which indefinitely authorises, a flight data provider to make payment directly or via a relevant institution to Belaeronavigatsia for aeronautical information publication data;
  •  A ban on the export, supply, delivery, making available and transfer, and related technical and financial assistance of: dual-use items irrespective of whether there is a military end-user; critical industry goods and technology; quantum computing and advanced materials; certain minerals; oil refining items; and luxury goods. and a ban on Belarusian and other specified ships from entering UK ports; There are also bans on imports of iron, steel and potash from Belarus, and related technical and financial assistance; on facilitating military activities; and on Belarusian and other specified ships from entering UK ports; and
  • The ECJU has removed Belarus as a permitted destination from nine open general export licences (OGELs).

Other key sanctions developments to note:

  • As part of its annual review of frozen assets, on 8 September 2022 OFSI requested that all persons that hold or control funds or economic resources belonging to, owned, held, or controlled by a designated person / entity (subject to UK sanctions), report the details of these assets to OFSI by Friday 11 November 2022.
  • An Economic Crime Act was adopted on 14 March 2022. The key points relevant to sanctions are as follows – all of which point to substantially more robust enforcement of UK sanctions:
    • Breaches of sanctions became strict liability offences on 15 June 2022, meaning that civil penalties can be imposed for breaches with no requirement to prove that the offender had knowledge or reasonable cause to suspect their activity breached sanctions;
    • HM Treasury can publicly “name and shame” organisations that have breached financial sanctions even where it has decided not to impose a penalty, the rationale being that the reputational risks will prove a deterrent;
    • Government departments and relevant bodies will share information proactively with HM Treasury to facilitate its enforcement of sanctions;
    • Foreign owners of UK property bought up to 20 years ago are required to reveal their identities, including those holding property in a trust or in shell companies; and
    • Several measures enable the Government to designate sanctions targets more quickly, removing the statutory test of ‘appropriateness’ in designations, enabling designations by description, and creating a new urgent designation procedure, through which the UK can designate targets already sanctioned by the US, Canada, Australia or the EU.
  • OFSI has provided guidance on aggregation when considering whether a designated entity ‘controls’ another entity (in which case, sanctions also apply to the ‘controlled’ entity), and states that the UK sanctions regime will not aggregate the shareholdings of designated entities. Consequently, if each of the designated person’s holdings falls below the 50% threshold in respect of share ownership and there is no evidence of a joint arrangement or that the shares are held jointly, the company would not be directly or indirectly owned by a designated person; and
  • The UK Government has introduced various new restrictions aimed at tackling Russian disinformation, including requirements that social media services must take reasonable steps to prevent content being accessible on their service(s) which is generated from a designated person, and that internet access services, including broadband providers, must take reasonable steps to prevent users of the service in the UK from accessing websites provided by a designated person.

EUROPEAN UNION

  • The European Commission has introduced proposals to add the violation of EU sanctions to the list of ‘EU crimes’; this is already a criminal offence in 12 Member States.
  • The European Commission has also announced a proposed Directive which would:
    • Provide clear rules on asset tracing and identification to boost cross-border cooperation between Asset Recovery Offices and national competent authorities, particularly in the context of preventing, detecting and investigating violations of EU sanctions;
    • implement new urgent freezing powers for Asset Recovery Offices;
    • strengthen provisions concerning confiscation without a conviction (for example, in cases of death or immunity of the accused) and confiscation of unexplained wealth linked to criminal activities;
    • require Member States to ensure post-conviction asset tracing investigations;
    • require Member States to consider the use of confiscated properties for public or social purposes; and
    • set up Asset Management Offices in all Member States to minimise costs and maximise the value of frozen assets.

Asset freezes:

  • Banks include: Sberbank, VTB, VEB.RF; Rossiya Bank and Promsvyanzbank;
  • Entities in strategic sectors notably defence, transport, research, media and aerospace including: Rosneft Aero; JSC Rosoboronexport; United Aircraft Corporation; United Shipbuilding Corporation; and Uralvagonzavod;
  • The criteria for listing have been expanded to include “leading business persons” in economic sectors providing substantive revenue to the Russian government and a long and growing list of senior officials, oligarchs, defence companies, and disinformation proliferators;
  • Individuals include: President Putin, former Ukrainian President Yanukovych, Foreign Minister Lavrov, Ministers and senior officials, all members of the Russian State Duma, oligarchs and members of their families, and senior directors of large state-owned corporations;
  • The EU has set up the “Freeze and Seize” Task Force to ensure the efficient implementation of EU sanctions across the EU. It will coordinate actions by Member States to seize and, where appropriate, confiscate assets of the listed oligarchs.

Financial services:

  • A ban on the provision of SWIFT services to: Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank, VEB, Sberbank, VTB Bank, Credit Bank of Moscow and Russian Agricultural Bank and to any entity established in Russia and owned (directly or indirectly) more than 50% by them;
  • A ban on  the sale supply, transfer or export of euro banknotes to or for use in Russia;
  • A ban on investment, participation or contribution to projects co-financed by the Russian Direct Investment Fund (RDIF), except where these activities are due under contracts concluded before 2 March 2022;
  • A ban on all transactions with Russia’s central bank and a freeze on all its assets; Exceptionally, transactions may be authorized if strictly necessary for the financial stability of the EU or a Member State;
  • A ban on providing credit rating services, or access to any subscription services in relation to credit rating activities, to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia;
  • A ban on new investments in the Russian energy sector;
  • PSB, Bank Rossiya, Alfa-Bank, Bank Otkriti, Almaz-Antey, Kamaz, Novorossiysk Commercial Sea Port, Rostec, Russian Railways, Sevmash, Sovcomflot and United Shipbuilding Corporation are now subject to capital market sanctions: dealings in transferable securities (including crypto-assets) or money-market instruments of any maturity issued by these and the previously listed entities are prohibited and no new loans/credit (of any maturity) may be granted to them (certain exceptions apply);
  • A ban on the listing and provision of services in relation to shares of Russian state-owned entities on EU trading venues;
  • Bans on any deposits from Russian nationals or legal persons if the total value exceeds 100,000 EUR; excludes nationals and residents of EEA member states and Switzerland. The prohibition includes deposits from legal persons established in third countries and majority-owned by Russian nationals or people residing in Russia. The acceptance of deposits for non-prohibited cross-border trade is subject to prior authorisation;
  • EU central securities depositories may no longer provide services for transferable securities issued after 12 April 2022 to any Russian persons;
  • No euro denominated transferable securities issued after 12 April 2022 may be sold to Russian persons or entities, subject to certain exceptions;
  • The Russian Maritime Register of Shipping has been added to the list of state-owned enterprises subject to financial restrictions;
  • The exclusion of all financial support to Russian public bodies;
  • A ban on the provision of crypto-asset wallet, account or custody services to Russian persons and residents, regardless of the total value of those crypto-assets; and
  • An extended prohibition on the sale of banknotes and transferrable securities denominated in any official currencies of the EU member states to Russia and Belarus, or to any natural or legal person, entity or body in Russia and Belarus.

Trade:

  • A ban on the purchase, import or transfer into EU Member States, directly or indirectly, of crude oil and certain petroleum products which originate in Russia or are exported from Russia, with transitional periods:
    • seaborne crude: 6 months for existing contracts and spot transactions (in effect from 5 December 2022);
    • refined petroleum products: 8 months for existing contracts and spot transactions (in effect from 5 February 2023);
    • direct imports into the EU of crude oil by pipeline are permitted to continue for the time being but such crude oil may not be transferred or sold to other Member States or third countries. Petroleum products made from such crude oil will be subject to a similar ban from 5 February 2023 (or, for Czechia, 5 December 2023);
  • There is an exception for seaborne crude oil and petroleum products that are loaded in/depart from/transit through Russia but originate in a third country and are owned by non-Russians;
  • A ban on insurance and other services related to the maritime transport to third countries of crude oil (as of 5 December 2022) or petroleum products (as of 5 February 2023) which originate in or are exported from Russia. This will be subject to a derogation that allows the provision of such services if the oil or petroleum products are purchased at or below a pre-established price cap. A prohibition on EU vessels providing maritime transport for such products to third countries will apply as of the date of the introduction of the price cap;
  • A ban on listed Russian state-owned broadcasters from broadcasting in the EU, and advertising products or services in any content broadcast by these entities;
  • A ban on the provision of architectural and engineering services, IT consultancy services, legal advisory services, accounting, auditing, bookkeeping or tax consulting services, business and management consulting and public relations services to the Government of Russia, or entities established in Russia. Certain exceptions apply, including where the provision of services is necessary for the exercise of the right of defence in judicial proceedings;
  • Export restrictions on equipment, technology and services for the energy industry in Russia (with the exception of the nuclear industry and the downstream sector of energy transport);
  • A ban on all transactions with certain state-owned companies including the Russian Maritime Shipping Register;
  • A ban on the export of certain luxury goods, including passenger vehicles valued at over EUR 50,000 and their spare parts;
  • The closure of  EU airspace to all Russian-owned, Russian registered or Russian-controlled aircraft;
  • A ban on the sale, supply, transfer or export of specific goods and technologies, and related services (financing or financial assistance, brokering services, technical assistance, and repair) in oil refining.  Exceptions for pre-existing contracts and cases of emergency apply;
  • A ban on the sale, supply, transfer or export of goods and technology, and related financial and technical services, for use in the aviation and space industry, including aircraft and aircraft parts and technology, insurance, inspection and maintenance;
  • A ban on the sale, supply, transfer or export, and related technical and financial services, to Russia or for use in Russia of all dual-use goods and technology. Exceptions apply for the case where such goods are used for non-military use, subject to a registration in the customs declaration as well as a declaration to the competent authorities of the first use;
  • A ban on the sale, supply, transfer or export, and related technical and financial services, to Russia or for use in Russia of a list of other goods and technology which is effectively the same as the UK’s and US’ equivalent lists. Similar exemptions and related notification and authorisation requirements generally apply as for dual-use items, but exemptions are very limited for 64 Russian entities in the defence, aviation and technology sectors;
  • With respect to the non-government controlled areas of the Donetsk and Luhansk separatist regions and Zaporizhzhia and Kherson oblasts: an import ban on all goods and related services; restrictions on trade and investment related to certain economic sectors; a prohibition on supplying tourism services; and an export ban on goods and technology suited to the transport, telecommunications, energy or oil, gas and mineral sectors; and a ban on the provision of technical assistance, brokering, construction or engineering services to infrastructure in the regions and within the aforementioned sectors. There are exceptions for humanitarian operations;
  • It is prohibited to sell, supply, transfer or export, directly or indirectly, maritime navigation goods and technology and related services to any natural or legal person, entity or body in Russia, for use in Russia, or for the placing on board of a Russian flagged vessel;
  • On a national basis, Germany has suspended certification of the Nord Stream 2 gas pipeline;
  • A prohibition on the purchase, import or transfer of coal and other solid fossil fuels into the EU if they originate in Russia or are exported from Russia;
  • A prohibition (with certain derogations) on providing access to EU ports to vessels registered under the flag of Russia or Russian-operated vessels;
  • A ban on any Russian and Belarusian road transport transporting goods by road within the EU, including in transit (with certain derogations);
  • A ban on the purchase, import or transfer (directly or indirectly) of Russia-origin gold (including jewellery) if it has been exported from Russia into the EU or to any third country;
  • Export bans targeting jet fuel and other goods such as quantum computers and advanced semiconductors, high-end electronics, software, sensitive machinery and transportation equipment;
  • Import bans on products such as: wood, cement, fertilisers, seafood, liquor, iron and steel, machinery and appliances, wood pulp and paper, cigarettes, plastics, vehicles, textiles, footwear, leather, ceramics, certain chemical products, cosmetics and elements used in the jewellery industry;
  • An export ban on items which may contribute to Russia’s military, industrial and technological enhancement including coal, certain electronic components, chemicals and torture goods;
  • An export ban on civilian firearms, components and ammunition, paramilitary equipment and spare parts;
  • A ban on EU nationals holding any posts on the governing bodies of certain Russian state-owned or controlled legal persons, entities or bodies;
  • A ban on the participation of Russian companies in public procurement in member states; and
  • The removal of Russia as a permitted destination for dual-use general export authorisations.

Belarus

  • Asset freezes on  high ranked members of the Belarusian political and military establishment and on entities in strategic industrial sectors;
  • A ban on transactions with the Central Bank of Belarus related to the management of reserves or assets;
  • A block on SWIFT services for Belinvestbank (Belarusian Bank for Development and Reconstruction), Belagroprombank, Bank Dabrabyt, the Development Bank of the Republic of Belarus, as well as their Belarusian subsidiaries;
  • Financial and air traffic sanctions;
  • A ban on the listing and provision of services in relation to shares of Belarus state owned entities on EU trading venues;
  • A €100,000 cap on deposits from Belarusian nationals or residents, or entities established in Belarus;
  • A ban on the sale of euro dominated transferable securities issued after 12 April 2022 to Belarusian nationals or residents, or entities established in Belarus;
  • A ban on the provision of services by EU central securities depositories (CSDs) to Belarusian nationals or residents, or entities established in Belarus;
  • A ban (with limited exceptions) on the sale, supply, transfer or export, directly or indirectly, to or for use in Belarus all dual-use goods, all the newly listed goods restricted for supply to Russia, certain machinery, and related financial and technical services; and
  • An expansion of existing bans on imports from Belarus into the EU of goods for producing tobacco products and the following products: minerals, wood, cement, iron and steel, rubber, and potash, and related financial and technical services.

Other key sanctions developments to note:

  • In September 2022, the EU renewed its Russia targeted sanctions regime for 6 months, until 15 March 2023 under Council Regulation (EU) No 269/2014. 1206 people and 108 entities are currently designated. 
  • The EU Council has adopted Decision (CFSP) 2022/1506 to support the development and implementation of sanctions information technology tools until December 2024, allocating a budget of €450,000. The Decision says the EU will support technology to provide information on EU sanctions and tools to allow secure information exchanges between the Member States, stakeholders and the Commission.
  • The EU has updated its guidance to state that (unlike with the UK regime) the EU will aggregate the shareholdings of designated entities in the context of assessing whether an entity is ‘controlled’ by designated entities (and therefore whether sanctions also apply to that ‘controlled’ entity). Therefore, if the aggregated ownership of a company by listed persons meets the 50% threshold, the company is considered jointly owned and controlled by listed persons. This applies, for example, if one listed person owns 30% of the company and another listed person owns 25% of the company.
  • The European Commission has introduced proposals to add the violation of EU sanctions to the list of ‘EU crimes’; this is already a criminal offence in 12 Member States.
  • The European Commission has also announced a proposed Directive which would:
    • Provide clear rules on asset tracing and identification to boost cross-border cooperation between Asset Recovery Offices and national competent authorities, particularly in the context of preventing, detecting and investigating violations of EU sanctions;
    • implement new urgent freezing powers for Asset Recovery Offices;
    • strengthen provisions concerning confiscation without a conviction (for example, in cases of death or immunity of the accused) and confiscation of unexplained wealth linked to criminal activities;
    • require Member States to ensure post-conviction asset tracing investigations;
    • require Member States to consider the use of confiscated properties for public or social purposes; and
    • set up Asset Management Offices in all Member States to minimise costs and maximise the value of frozen assets.

UNITED STATES

The US has announced that the Administration will propose a new legislative package that would include:

  • a streamlined process for the forfeiture of US property that is owned by listed Russian oligarchs and linked to specified unlawful conduct;
  • using forfeited property proceeds to “remediate harms” caused to Ukraine by Russian aggression;
  • rendering unlawful the knowing or intentional possession of proceeds directly obtained from “corrupt dealings” with the Russian government;
  • expanding the forfeiture authorities to encompass property used to facilitate sanctions violations;
  • adding sanctions evasion to the definition of “racketeering activity”;
  • allowing for extended pursuit of money laundering prosecutions (and post-conviction forfeitures) based on foreign offences by extending the statute of limitations from 5 to 10 years; and
  • facilitating the enforcement of foreign restraint and forfeiture orders for criminal property.

Asset freezes:

  • Banks: include VTB (and 20 subsidiaries); Bank Otkritie (and 12 subsidiaries); Sovcombank (and 22 subsidiaries); Novikombank; Vnesheconombank (VEB, and 25 subsidiaries); Promsvyazbank (PSB, and 17 subsidiaries); SMP Bank; Sberbank; Rostec; and Transkapitalbank. General licences provide for certain wind-down periods;
  • Entities in strategic sectors notably defence, technology, transport, research, media, and aerospace including: Nord Stream 2 (and its CEO Matthias Warnig); Russian Helicopters; Tactical Missiles Corporation; United Shipbuilding Corporation; the Main Intelligence Directorate (GRU); and a number of ships, and Kremlin-aligned yacht brokerage companies, yachts and private aircraft.
  • Individuals include: President Putin; Foreign Minister Lavrov; Ministers and senior officials, oligarchs, members of their families and other “elites close to Putin” including VTB Bank’s management board; Members of the Russian State Duma; 16 members of the Security Council of the Russian Federation; the Governor of the Central Bank of Russia; and executives of designated banks including Sberbank, Gazprombank, and other large state-owned corporations.
  • The US government has launched an interagency initiative, ‘Task Force KleptoCapture’, to co-ordinate work on sanctioning oligarchs.
  • The House of Representatives passed the Asset Seizure for Ukraine Reconstruction Act (Notice) which, if entered into law, would allow for the liquidation of certain assets frozen under the Russia sanctions regime for humanitarian purposes linked to Ukraine. The bill has moved to the Senate. A similar bill with the same title was introduced to the Senate in March.

Financial services:

  • A ban on all transactions involving the Central Bank of the Russian Federation; the National Wealth Fund of the Russian Federation; and the Ministry of Finance of the Russian Federation, and dealing in bonds issued by them after 1 March;
  • Sberbank and 25 foreign subsidiaries are subject to correspondent and payable-through account sanctions;
  • A ban on dealing in new debt of over 14 days maturity and new equity of strategic entities: Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways. General Licences authorise certain transactions related to international organisations, food and medicines, emergency landings, energy, certain debt or equity, derivative contracts, and transactions with certain blocked persons;
  • General Licences authorise, among other things: the wind down of transactions involving Gazprom Germania GmbH and its subsidiaries until 30 September 2022; transactions related to Pension Payments to U.S. Persons and to non-US persons not located in Russia; certain transactions relating to the divestment or transfer of debt or equity of, and the wind down of derivative contracts involving, PJSC Severstal or Nord Gold PLC; civil aviation safety; wind down involving Severstal and Nord Gold; and wind down involving MMK Metalurji; certain transactions necessary for  the day-to-day operations of US persons in Russia otherwise prohibited by Directive 4 of Executive Order 14024 regarding  transactions involving Russia’s Central Bank, National Wealth Fund and Ministry of Finance; and until 7 December 2022 US persons and their subsidiaries to complete certain transactions necessary for their routine operations in Russia;
  • OFAC has confirmed that it will not renew General Licence 9C that expired on 25 May 2022. This had authorised dealings in debt or equity of major Russian banks including VEB, VTB and Sberbank, and their subsidiaries, and the receipt of payments in connection with debt or equity of the Central Bank of Russia, the National Wealth Fund of Russia and the Russian Ministry of Finance;
  • A ban on new US investment in Russia;
  • A ban on the export and supply of dollar-denominated banknotes to the Russian Government or any person located in Russia;
  • The publication of new Treasury guidance on sanctions compliance, including in relation to virtual currency;
  • A new E.O. providing for future investment restrictions in any sector of the Russian economy;
  • Selected Russian banks removed from the SWIFT messaging system;
  • New investment by a US person in any sector of the Russian economy, as may be determined by the Secretary of the Treasury; and
  • The export, re-export, sale or supply of USD denominated banknotes to the Russian government or any person located in Russia.

Trade:

  • A ban on the import into the US of Russian-origin fish, seafood, and preparations thereof, alcoholic beverages and non-industrial diamonds;
  • A ban on the export, re-export, sale or supply of luxury goods to any Russia-based person, including certain: alcoholic beverages; tobacco products; beauty products; leather products; textiles; designer clothing; footwear; diamonds; pearls; precious gems and metals; and vehicles, subject to certain General Licences;
  • General Licences authorise, among other things: overflight payments, emergency landings, and air ambulance services; certain transactions in connection with a patent, trademark, copyright; certain transactions relating to the safety of civil aviation; certain transactions relating to the export of agricultural equipment; various transactions related to telecommunications and internet-based communications; certain transactions related to the prevention, diagnosis and treatment of Covid-19 and/or medical research; the provision of certain accounting services; and transactions involving the FSB in certain circumstances;
  • The removal of Russia’s Most-Favoured-Nation (MFN) status;
  • A ban on the import of Russian crude oil, gas, coal and related products. Subject to finalising the details of the implementation of a price cap agreed by the G7, the US appears likely to introduce a ban on insurance for ships carrying Russian oil to third countries with effect from the same dates as the EU’s oil import ban (5 December 2022 for crude oil and 5 February 2023 for refined products), exempting cargoes that meet the price cap;
  • A ban on the export of luxury goods to any person located in Russia including high end-watches, apparel and alcohol, as well as luxury vehicles, jewellery, and other goods frequently purchased by “Russian elites”;
  • A ban the import of goods from “signature” sectors of the Russian economy, including seafood, spirits/vodka, non-industrial diamonds and gold;
  • A ban on Russian aircraft (owned, chartered or operated) from US airspace. A Temporary Denial Order against Rossiya Airlines for 180 days from 20 May 2022. Similar orders have already been issued against Aeroflot, Azur Air, UTair, and Aviastar. The orders prevent the supply of any US-origin or US-controlled items for use in servicing aircraft operated by these airlines.
  • New export licensing requirements for items not previously controlled for Russia (listed in Categories 3-9 of the Commerce Control List; effectively the same list of items as for the UK and the EU) expanding US scrutiny of transactions to almost any sensitive dual-use technology, software, or commodities that could be used to support Russia’s war effort, for producing chemical or biological weapons, quantum computing-related items and items necessary for advanced manufacturing across a number of industries, and a policy of denial of all export licences to Russia, with some exceptions (e.g. humanitarian);
  • Expansion of controls on foreign-made (non-US) direct products of US technology for military end-use and users in Russia;
  • A ban on all supply of ECCN 5A002 or 5D002 encryption products and software to Russia and Belarus.  License exception ENC is no longer available for those items except for exports to US or close-ally-country companies’ operations. This ban includes software updates, upgrades, patches, and other technical support relating to that software. A Consumer Communications Devices (CCD) license exception applies to mass market products under ECCN 5A992 or 5D992;
  • Another 71 (in addition to the previous 140) Russian military end users in the technology, research, defence, marine and aerospace industries, have been added to the Entity List and thus are subject to a comprehensive export ban The ‘military end user’ and ‘military-intelligence end user’ lists prohibit the supply of certain US-origins to listed entities in Russia and operating in third countries.
  • Comprehensive sanctions on the Donetsk and Luhansk separatist regions, prohibiting new investment and the import or export of goods, services or technology (directly or indirectly). General Licenses provide exclusions for: food, medicine, medical devices; telecommunications and mail services; international organizations; personal remittances; and personal internet communications; certain transactions related to the provision of maritime services performed by individuals ordinarily resident in the separatist regions; certain journalistic-related activities in the separatist regions and the Crimea;
  • A policy of denial on items related to the Russian deep-water oil and gas industries, which have been subject to export controls since 2014. In addition, licence requirements have been added for the export, re-export or transfer (in-country) to or within Russia of items needed for oil refining;
  • The Nuclear Regulatory Commission will suspend GLs for exports of source material, special nuclear material, by-product material and deuterium to Russia;
  • A ban on the export of goods similar to the EU’s list of “goods which could contribute in particular to the enhancement of Russian industrial capacities” (Article 3k and Annex XXIII of Council Regulation 833/2014) including containers, machinery, tools, industrial engines and motors, goods vehicles, and equipment for refrigeration, elevators, construction, printing, textiles, valves, bearings, seals, electrical, radio, railways and testing;
  • A ban on accountancy, management consultancy, and PR services exports to Russia; and
  • A ban on US advertising and sales of equipment to three government-controlled television stations (Channel One, Russia-1 and NTV).

Belarus:

  • Asset freezes: 26 Belarusian individuals and entities including: President Alyaksandr Lukashenka and his wife; Dzmitry Paulichenka; Yury Sivakov; Viktar Sheiman; Belinvestbank; Bank Dabrabyt; and companies in the defence and security sectors;
  • Export controls: the same measures as apply to Russia, including those on luxury goods. The addition to the Entity List of entities related to the defence and security sectors; and
  • Visa restrictions: on 17 people, including officials from state-owned factories and universities, said to be responsible for undermining democracy in Belarus.