This briefing summarises the latest UK and EU sanctions developments in response to the conflict in Ukraine.
UK
New designations
On 6 April, the UK’s Office of Financial Sanctions Implementation (“OFSI”) announced the addition of ten further entries to the UK’s asset freeze list, comprising eight individuals (described as oligarchs active in key Russian strategic industries) and two banks (Sberbank and Credit Bank of Moscow).
New and amended general licences (“GLs”)
On the same day, OFSI issued a new GL – GL INT/2022/1544176 – permitting the winding down of transactions involving Credit Bank of Moscow or any entities owned or controlled by it (“subsidiaries”). The GL expires on 6 May 2022.
OFSI also amended its existing Sberbank GL – GL INT/2022/1277877 – which was issued when Sberbank was designated for the purposes of restrictions on the provision of correspondent banking services and processing of sterling payments, as discussed in our previous blogpost. This has been amended to permit dealings with Sberbank’s funds or the making available of funds to or for the benefit of Sberbank for the purposes of processing payments relating to the making available of crude oil, petroleum products and gas in the UK. This GL expires on 24 June 2022.
At the time of writing, no general ‘wind down’ licence relating to Sberbank had been issued. As such, the only transactions currently permitted under licence would be those related to energy (as described above), and any individually licensed transactions.
OFSI has also made amendments to two other GLs, as set out below:
- amendments to GL INT/2022/1280876 relating to VTB Capital plc on 1 April to permit payments in connection with insolvency proceedings relating to VTB Capital plc; and
- amendments to GL INT/2022/1438977 relating to GEFCO on 4 April to permit the processing of payments or transactions relating to the sale and transfer of Russian Railways’ shares in GEFCO.
New sanctions announced (not yet in force)
On 6 April, the UK announced further planned sanctions against Russia, including:
- an “outright ban” on all new outward investment to Russia;
- proposals to end all dependency on Russian coal and oil and an end to imports of Russian gas “as soon as possible thereafter”;
- a ban on the export of key oil refining equipment and catalysts (stated to come into effect next week (w/c 11 April)); and
- a ban on the import of Russian iron and steel products.
With the exception of the oil refining equipment restrictions mentioned above, the announcement does not specify when the various measures are intended to come into force. No new legislation had been published at the time of writing.
EU
New sanctions proposed (not yet in force)
On 5 April, President von der Leyen made a statement proposing a fifth round of EU sanctions against Russia. The package comprises six pillars, as set out below:
- an import ban on Russian coal;
- a “full transaction ban” on four Russian banks, including VTB;
- a ban on Russian and Russian-operated vessels from accessing EU ports and on Russian and Belarussian road transport operators;
- export bans in relation to quantum computers, advanced semiconductors, sensitive machinery and transportation equipment;
- import bans on “products from wood to cement, from seafood to liquor”; and
- a general ban on participation of Russian companies in Member State public procurement or exclusion of financial support to Russian public bodies.
The statement also notes that further designation of individuals is in progress, and that the EU is working on additional sanctions, including in relation to oil imports and “reflecting on” ideas presented by Member States “such as taxes or specific payment channels such as an escrow account”.
At the time of writing, no legislation has been published in relation to these new restrictions.
Additional EU FAQs
The Commission has continued to update its FAQs, including through the addition of new documents relating to circumvention and due diligence and crypto-assets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Originally Published At Mondaq Platform
ALSO
Sanctions Tracker – U.S. Imposes Broad New Restrictions On Investment In Russia
In the United States government’s latest response to the crisis in Ukraine, it imposed broad new investment and services restrictions pursuant to a new executive order, new sectoral restrictions, and the designation of a substantial number of additional individuals and entities on OFAC’s Specially Designated Nationals and Blocked Persons (“SDN“) List, including two major Russian banks. These new restrictions will likely have a broad impact for U.S. and non-U.S. companies doing business with Russia.
We previously discussed Russia-related sanctions measures imposed by the United States on March 25, March 15, March 14, March 9, March 8, March 3, February 28, February 25, February 23, and February 4. We also discussed recent sanctions measures related to the Russian energy sector in a podcast episode.
Prohibition on New Investments in, and Provision of Services to, Russia
On April 6, 2022, President Biden issued an executive order (the “April 6, 2022 E.O.“) which broadly prohibits all “new investments” in Russia by U.S. persons. The April 6, 2022 E.O. also prohibits transactions that “cause[] a violation” of the order, and prohibits U.S. persons from directly or indirectly facilitating conduct by non-U.S. persons which would be prohibited if engaged in directly by a U.S. person. This means that U.S. persons cannot facilitate new Russia investments by companies or persons outside of the U.S.
Moreover, a non-U.S. person could be held liable for “causing” a U.S. person to violate the order if the non-U.S. person made a new investment in Russia in U.S. dollars (“USD“) cleared through or transferred with the involvement of a U.S. correspondent bank or other U.S. person. The April 6, 2022 E.O. does not specify how investments by U.S. persons in non-U.S. companies which engage in new Russia investments would be treated, and OFAC may release further guidance explaining the parameters of this broad restriction on new investments.
In addition, the April 6, 2022 E.O. prohibits the exportation, reexportation, sale, or supply from the U.S., or by a U.S. person, of certain categories of services to any person in Russia. The April 6, 2022 E.O. also prohibits U.S. persons from approving, financing, facilitating, or guaranteeing any new investment or provision of certain categories services by a non-U.S. person.
The specific prohibited categories of services will be determined by the Secretary of the Treasury, in consultation with the Secretary of State. Depending on how these categories are defined, there is the potential for a broad prohibition on providing services to Russia, which would prohibit the bulk of Russia-related business transactions by U.S. persons.
Sectoral Sanctions on the Russian Aerospace, Electronics, and Marine Sectors
On March 31, 2022, OFAC issued a “Determination Pursuant to Section 1(a)(i) of Executive Order 14024” (the “Determination“). E.O. 14024 sets forth a framework to impose sanctions on any person determined by the Secretary of the Treasury to operate in certain sectors of the Russian economy. Pursuant to the Determination, the Secretary of the Treasury, in consultation with the Secretary of State, determined that E.O. 14024 now applies to the Russian aerospace, electronics, and marine sectors. This means that non-U.S. persons risk exposure to U.S. secondary sanctions liability by operating in Russian aerospace, marine, or electronics sectors.
Designation of Sberbank, Alfa-Bank, and Related Entities as SDNs
On April 6, 2022, OFAC designated Public Joint Stock Company Sberbank of Russia (“Sberbank“), 42 Sberbank subsidiaries, Joint Stock Company Alfa-Bank (“Alfa-Bank“), six Alfa-Bank subsidiaries, and five vessels owned by an Alfa-Bank subsidiary, as SDNs.
This means that all property and interests in property of these entities that are in the U.S. or in the possession or control of U.S. persons are blocked. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more of these entities are also blocked. Furthermore, all transactions by U.S. persons or within (or transiting) the U.S. that involve any property or interests in property of these entities are prohibited unless authorized by a general or specific license issued by OFAC.
On the same day, OFAC issued the following General Licenses (“GLs“):
- GL 8B supersedes and replaces the prior version of GL 8, and adds Alfa-Bank to a list of companies in which transactions “related to energy” are authorized until June 24, 2022.
- GL 9B supersedes and replaces the prior version of GL 9, and authorizes certain transactions in debt or equity of Alfa-Bank (or any entity owed 50% or more by it), issued prior to April 6, 2022, until June 30, 2022. However, any divestment or transfer of, or facilitation of divestment or transfer of, Alfa-Bank debt or equity must be to a non-U.S. person.
- GL 10B supersedes and replaces the prior version of GL 10, and authorizes certain transactions related to derivative contracts involving Alfa-Bank, or any entity owed 50% or more by it, until June 30, 2022.
- GL 21 authorizes a wind-down period for U.S. persons to engage in transactions with Sberbank CIB USA, Inc., or any entity owed 50% or more by it, until June 7, 2022.
- GL 22 authorizes a wind-down period for certain transactions involving Sberbank, or any entity owed 50% or more by it, until April 13, 2022. Notably, GL 22 does not authorize transactions that violate Directive 2 (pursuant to E.O. 14024).
- GL 23 authorizes a wind-down period for transactions involving Alfa-Bank, or any entity owed 50% or more by it, until May 6, 2022.
Additional SDN Designations
On April 6, 2022, OFAC designated 25 individuals as SDNs, including family members of Vladimir Putin and Russian Foreign Minister Sergey Lavrov, as well as Russian Security Council members, pursuant to E.O. 14024. Although OFAC previously sanctioned certain members of the Russian Security Council, the April 6, 2022 designations include “the remaining members of Russia’s Security Council.” In a press release, OFAC also noted that “[m]any of these individuals have also been sanctioned by [the U.S.’s] international partners, including Canada, the European Union (EU), Japan, New Zealand, Australia, and the United Kingdom (UK).”
Previously, on March 31, 2022, OFAC designated 21 entities and 13 individuals as SDNs, including “malicious cyber actors” and “Russia’s largest chipmaker.” According to a press release, OFAC designated these particular entities and individuals “as part of its crackdown on the Kremlin’s sanctions evasion networks and technology companies, which are instrumental to the Russian Federation’s war machine.”
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Originally published At Mondaq Platform
