As the Russian invasion of Ukraine continues, the global pressure on the Putin regime intensifies with the EU issuing additional sanctions and export controls on Friday evening (February 25). The legislation implementing the UK’s latest announced sanctions is expected early this week. Both the EU and the UK have added further persons to their respective asset freeze lists, and both have now designated Mr. Putin and his Foreign Minister, Mr. Lavrov.
European Union (EU) developments
The new regulations amend the existing framework of sanctions levied against Russia following its 2014 annexation of Crimea. The new measures now in effect include:
- An export ban on dual-use goods and technology (as listed in Annex I to Regulation (EU) 2021/821 (link)) to any person in Russia or otherwise for use in Russia and a prohibition on the provision of technical assistance, financial assistance, or other services relating to such goods and technologies (with some exceptions and licenses available).
- A general export ban on items listed in Annexes VI, IX and X of Regulation (EU) 2022/328 (link) to any person in Russia or otherwise for use in Russia, along with the associated restrictions on assistance and related services (again, with some exceptions and licenses available).
- In particular, the export ban referred to above prohibits the sale, supply, transfer or export, directly or indirectly, of goods and technology suited for use in the aviation or the space industry, whether or not originating in the EU to any natural or legal person, entity or body in Russia or for use in Russia. This prohibition is subject to a wind-down provision that allows for the execution until March 28, 2022, of contracts concluded before February 26, 2022.
- A prohibition on the provision of public financing or financial assistance for trade with, or investment in, Russia. This excludes financing agreed prior to February 26, 2022, projects of EU-established enterprises below a value threshold and for trade in food or for agricultural, medicinal or humanitarian purposes.
- A ban on dealing with transferable securities and money-market instruments after April 12, 2022, has been introduced relating to Alfa Bank, Bank Otkritie, Bank Rossiya, Promsvyazbank, Almaz-Antey, Kamaz, Novorossiysk Commercial Sea Port, Rostec, Russian Railways, JSC PO Sevmash, Sovcomflot and United Shipbuilding Corporation. Loans directly or indirectly made to such entities are also being prohibited from February 26, 2022 (with some exemptions for trade finance and pre-existing loans).
- A prohibition on accepting deposits from Russian nationals, natural persons residing in Russia, or legal persons established in Russia of more than €100,000:
- The ban excludes nationals of an EU Member State or natural persons with a residence permit in a Member State.
- The ban also excludes deposits necessary for non-prohibited cross-border trade in goods and services between the EU and Russia.
- The restriction is coupled with a reporting obligation. Credit institutions must report to their national competent authority a list of deposits held by relevant persons exceeding €100,000 by May 27, 2022, and provide regular updates of such deposits for every 12 months thereafter.
- A further prohibition on trading venues registered or recognized in the EU from listing or providing services for the transferable securities of persons established in Russia and with over 50% public ownership.
- Further financial prohibitions on central securities depositories relating to transferrable securities issued after April 12, 2022, Euro denominated transferable securities issued after this date, and units in collective investment undertakings with exposure to such securities
Many of the above restrictions are subject to exceptions and/or licensing regimes, and specific wind-down provisions have been included in some cases covering obligations arising before February 26, 2022.
Some level of agreement also appears to have been met between the EU Member States regarding Russia’s continued access to the SWIFT payment system. Following some disagreement in this area, targeted sanctions blocking a “certain number of Russian banks” have now been announced. The final list of institutions is being drawn up but will likely include those banks currently subject to combined sanctions. The President of the European Commission has announced that on an EU-wide basis, airspace is now closed to Russian-owned, Russian-registered or Russian-controlled aircrafts.
Legislation is expected to be published in the UK this week (w/c February 28, 2022) implementing the previously announced sanctions. (See our earlier blog posts – here and here.) We will publish an updated blog post when these are published.
The UK has also announced today (February 28, 2022) that further restrictive measures shall be implemented targeting the Central Bank of the Russian Federation (CBR). This measure, taken in concert with the U.S. and EU, aims to prevent the CBR from deploying foreign reserves in such a manner to circumvent sanctions. According to a statement published this morning by the UK Office of Financial Sanctions Implementation (OFSI):
“The UK Government will immediately take all necessary steps to bring into effect restrictions to prohibit any UK natural or legal persons from undertaking financial transactions involving the CBR, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation. The UK Government intends to make further related designations this week, working alongside our international partners.”
The UK Government has announced that it is fast-tracking transparency legislation designed to prevent the UK being used as a hiding place for Russian oligarchs’ “ill-gotten gains.” The Economic Crime Bill will include a register requiring foreign owners of UK property to declare and verify their identities. This register is designed to pierce the veil of complex corporate structures being used to obfuscate asset ownership and is to be accompanied by a strengthening of the “Unexplained Wealth Order” (UWO). UWOs allow law enforcement agencies to require individuals to explain the source of their wealth, with a risk of property forfeiture if sufficient evidence can’t be adduced that the assets are legitimate. While UWOs have existed since 2018, their successful use until now has been limited, and further provisions are expected to strengthen the UWO as a tool for combatting money laundering.
The UK has also ramped up its aircraft ban. Having previously banned Russia’s national airline from flying in UK airspace, the UK has since banned all Russian planes (whether commercial or private) from flying in UK airspace or landing in the UK.
Following the designation of Russia’s VTB Bank, OFSI has issued a General Licence (INT/2022/1272278 – link). The license allows for transactions with VTB Bank and its UK subsidiaries (such as VTB Capital plc) to be wound down, including by closing out any existing positions. UK financial institutions are also permitted under the license to carry out activities reasonably necessary to effect such actions. The license does not, however, authorize any act which will result in funds or economic resources being made available in breach of the currently imposed sanctions.