The EU and UK have imposed additional export controls and sanctions with respect to Russia and Belarus connected to the Russian invasion of Ukraine. Below is a summary of key developments over recent days since our last blog post on EU and UK developments [here]. This is a rapidly developing area and future blog posts will summarize further developments.
On February 28, 2022, the EU banned Russian air carriers, aircraft registered in Russia, and non-Russian aircraft owned, chartered or controlled by Russian persons from landing in, taking off from, or overflying any EU territory (except in emergency situations).
Further financial restrictions imposed
The EU has continued to levy sanctions targeting Russia’s financial systems. It is now prohibited to:
- Take part in transactions related to the management of the assets or reserves of the Central Bank of Russia (CBR), including any transactions with counterparties acting on behalf of, or at the direction of, the CBR.
- Invest, participate, or contribute to projects financed by the Russian Direct Investment Fund.
- Provide Euro denominated banknotes to Russia, to any person in Russia, or for use in Russia (subject to some limited exceptions).
In addition, from March 12, 2022 it is prohibited to provide specialized financial messaging services to the following banks or any Russian-established subsidiary that is directly or indirectly owned (50% or more) by such banks (i.e., a “SWIFT ban”): (i) Bank Otkritie; (ii) Novikombank; (iii) Promsvyazbank; (iv) Bank Rossiya; (v) Sovcombank; (vi) Vnesheconombank (VEB); and (vii) VTB Bank.
The list of individuals subject to asset freezes in the EU has continued to grow. Notable additions include: (i) SOGAZ and (ii) Alisher Usmanov.
It is now prohibited for operators to broadcast (or facilitate the broadcasting) of any content by Sputnik or Russia Today (specifically—Russia Today: English, UK, Germany, France or Spanish). The prohibition extends to transmission or distribution by any means including via cable, satellite, IP-TV, internet service providers, internet video-sharing platforms or applications (whether new or pre-installed). Any broadcasting license or authorization, transmission or distribution arrangements with these entities is also suspended.
Asset freezes have now been levied against specific Belarusian individuals as a consequence of Belarus’ assistance with the Russian invasion.
In addition, existing import restrictions against Belarus (in place under 2006 regulations) have been expanded to cover further sectors, including the wood, cement, rubber, iron, and steel industries. It is now prohibited to import (directly or indirectly) listed products which are located in, or originated from, Belarus. The relevant products are listed in annexes to the regulation (link).
A wind-down provision has been included which allows for the execution until June 4, 2022, of contracts concluded before March 2, 2022, or ancillary contracts necessary for the execution of such contracts.
Further, the supply of dual-use, and listed military and technological goods and technology to Belarus or for use in Belarus is also prohibited as is the supply of listed machinery. The list of prohibited goods is included as an annex to the regulation. There are limited exceptions and licensing grounds that relate to this prohibition.
Additional asset freezes have been imposed against a range of individuals and entities, including: VEB, Bank Otkritie; Sovocombank; and the Russian Direct Investment Fund (and its CEO).
The UK has implemented a number of previously announced restrictions on financial dealings with Russia. It is now prohibited:
- To provide financial services for the purposes of reserve and asset management or foreign exchange to the Central Bank of the Russian Federation; the National Wealth Fund of the Russian Federation; the Ministry of Finance of the Russian Federation (or any person owned/controlled by the above or acting on their behalf) unless a license is obtained.
- To deal with transferable securities or money-market instruments issued by the following entities (variations exist relating to maturity periods and issue dates):
- A UK entity owned by Sberbank, VTB Bank, Gazprombank, VEB, Rosselkhozbank, OPK Oboronprom, United Aircraft Corporation, Uralvagonzavod, Rosneft, Transneft, and Gazprom Neft; or
- The Government of Russia, an individual resident of Russia or an entity incorporated in Russia (unless domiciled outside of Russia or a branch or subsidiary of an entity domiciled outside of Russia), or any entity acting on their behalf.
- To provide loans or credit to the above entities (variations exist relating to maturity periods).
- For UK credit or financial institutions to have a correspondent banking relationship with Sberbank or to process any sterling payments to, from, or via Sberbank.
The UK Office of Financial Sanctions Implementation (OFSI) has issued a number of licenses which allow for otherwise prohibited activities to proceed if certain conditions are met. OFSI has so far issued:
- A license for the FCA, FSCS, PRA and the Bank of England (and any other financial services authority) to engage with VTB Bank’s UK subsidiaries until March 1, 2023, for the purposes of their functions in relation to prudential supervision or protecting, maintaining, or enhancing the stability of the UK’s financial system.
- A license for VTB Bank’s UK subsidiaries to make payments for “basic needs” until March 1, 2023 (and for UK financial service institutions to process such payments and for UK individuals to receive such payments). “Basic needs” include payments relating to: (i) insurance premiums; (ii) property management; (iii) salaries; (iv) tax; (v) mortgage and utility payments; (vi) charges arising from the routine holding and maintenance of frozen funds or economic resources; and (vii) legal fees.
- A license for dealing in transferable security or money-market instruments, making certain loans that would otherwise be prohibited, or processing payments in relation to such transactions until March 8, 2022.
- A license for maintaining a correspondent banking relationship with, and processing payments in respect of, Sberbank until 23:59 on March 31, 2022.
- A license for processing sterling payments relating to Sberbank or non-UK financial institutions under its ownership or control until June 24, 2022, for the purposes of making crude oil, petroleum products or gas available in the UK.
The current trade restrictions have been extended. In addition to military and dual-use goods and technology, the prohibitions now also apply to “critical industry” goods and technology (subject to some limited exceptions). This is listed in the schedule to the regulation (link) and relates to the following categories of goods: (i) electronic devices/components and related equipment; (ii) computers and related equipment; (iii) telecommunications and information security equipment; (iv) sensors and lasers; (v) navigation and avionics equipment; (vi) marine vessels and equipment; and (vii) aerospace and propulsion equipment, including engines and aircraft.
The UK Government has also confirmed that all current licenses for the export of dual-use goods to Russia have been suspended and that Russia has been removed as a permitted destination from nine UK open general export licenses.
In addition to the current airspace ban, the UK has also implemented a regulation prohibiting ships entering UK ports where they are owned, controlled or chartered by either: (i) a designated person; (ii) an individual (or group of individuals) ordinarily resident in Russia; or (iii) an entity which is incorporated or located in Russia, or otherwise where the ship is registered in Russia, or flying the flag of Russia.
Under the new regulation, the government has the power to direct any such ships to enter or leave a port, proceed to a specific location, or stay where they are.
The UK government also has the power to designate individual ships which will be subject to the same restrictions.
Asset freezes have been extended to Belarusian defense companies JSC 558 Aircraft Repair Plant and JSC Integral, and senior members of the Belarussian Military and Ministry of Defence, namely: (i) Andrei Burdyko; (ii) Victor Vladimirovich Gulevich; (iii) Sergei Simonenko; and (iv) Andrey Zhuk. A number of other companies and individuals in Belarus are already subject to historic sanctions in the UK. The current list can be accessed on the Government’s website (link).
The EU has announced further asset freezes will be imposed, targeting the yachts, cars, and luxury properties of oligarchs, and further sanctions will be targeted at the Lukashenko regime in Belarus.
The UK has announced that UK persons will be prohibited from transactions involving the CBR or the Ministry of Finance of the Russian Federation and that a deposit limit will apply to Russian nationals of £50,000 (similar to the €100,000 limit currently imposed by the EU). The UK continues to push forward with its accelerated timescale for the Economic Crime Bill seeking to improve transparency in relation to UK assets owned by overseas individuals and entities.
On March 3, 2022, the UK Government further announced that Russian companies in the aviation or space industry will be prevented from making use of UK-based insurance or reinsurance services directly or indirectly. Further details of the legislation will reportedly be available in due course.
We will continue to monitor these updates.