On March 4, 2022, HM Treasury’s Office of Financial Sanctions Implementation (OFSI) published an updated version of its Russia guidance and issued two new general licences permitting the wind down of positions with Sberbank and involving Bank Otkritie, Promsvyazbank, Bank Rossiya, Sovcombank, and VEB. The UK government also put forward a series of amendments to the Economic Crime (Transparency and Enforcement) Bill proponents say is needed to crack down on corrupt elites and ramp up pressure on President Putin’s regime.
On March 1, 2022, four new amendments to The Russia (Sanctions) (EU Exit) Regulations 2019 (Russia Regulations) were laid before parliament and came into immediate effect. The amendments revise the financial and investment restrictions provisions contained in Part 3, Chapter 2 and the trade sanctions provisions set out in Part 5. New restrictions also have been introduced banning Russian ships from UK ports under Part 6 and introducing restrictions on the provision of financial services for the purpose of foreign exchange reserve and asset management.
On February 28, 2022, the UK government announced the designation of a further three Russian banks under the Russia (Sanctions) (EU Exit) Regulations 2019 (Russia Regulations) determined to be involved in obtaining a benefit from, or supporting, the Government of Russia. Two of the three banks already were sanctioned by the United States. Additional banks, including Sberbank, are expected to be targeted in the coming days. The UK government also issued three general licenses for winding down some newly sanctioned business in the UK.
The three banks targeted are:
- Bank Otkritie Financial Corporation PJSC; and
- PJSC Sovcombank.
The UK measures, which took effect immediately upon their announcement, impose asset freezes and prohibitions on making funds or economic resources available to – or for the benefit of – designated persons. The prohibition on dealing with the funds or economic resources of the designated persons also extends to any legal entities they own or control, directly or indirectly, even if the particular entity is not itself listed by the UK as a designated person.
The Chancellor of the Exchequer, in coordination with the Governor of the Bank of England, also announced the UK Government’s intention to impose further sanctions targeting the Central Bank of the Russian Federation (CBR). This action will be taken in concert with the United States and the EU, to prevent the CBR from deploying its foreign reserves in ways that undermine the impact of sanctions imposed by the UK and its allies, and to undercut its ability to engage in foreign exchange transactions to support the Russian rouble. HM Treasury has stated that 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 later this week.
Foreign Secretary Truss also announced in a statement to the UK parliament that the UK government will be laying two new pieces of sanctions legislation. The first will introduce a set of new powers against Russia’s financial sector, including powers to prevent:
- Russian banks from clearing payments in Sterling; and
- the Russian state from raising debt in the UK.
As soon as this legislation is in force, Foreign Secretary Truss has stated that it will be applied to Sberbank. She also announced the UK government’s intention to bring in a full asset freeze on all Russian banks within days in coordination with the UK’s allies.
The second piece of legislation will ban exports to Russia across a range of critical sectors, including high-end technological equipment such as microelectronics, marine, and navigation equipment. The Department for International Trade and HM Treasury will offer advice and guidance to affected UK businesses regarding the impact of these new measures.
Further legislation is expected to follow in the coming weeks to sanction Russian-occupied territories in the Donbas, extend more sanctions to Belarus, and limit Russian deposits in UK banks.
In the early hours of March 1, 2022, the UK government issued three new general licences under Regulation 64 of the Russia Regulations, ahead of the anticipated laying of further Russia sanctions legislation in parliament later the same day:
- INT/2022/1277777 – provides a wind down period in respect of sovereign debt, loans and money market instruments measures that will expire on March 8, 2022.
- INT/2022/1277778 – provides a wind down period in respect of clearing and correspondent banking prohibitions that will expire on March 31, 2022. The licence permits UK credit or financial institutions to –
- continue a correspondent banking relationship with Sberbank; and
- process a sterling payment to, from or via Sberbank, a non-UK credit or financial institution that is owned or controlled directly or indirectly by Sberbank, or a UK credit or financial institution that is owned or controlled directly or indirectly by Sberbank.
Relevant Institutions also may process GBP payments made in accordance with the permissions above.
- INT/2022/1277778 – adds additional days to INT/2022/1277778 to provide a wind down period until the June 24, 2022 in respect of clearing and correspondent banking prohibitions where the payments relate to making so-called “Relevant Energy Products” (e., crude oil, gas, and petroleum products as defined in the licence) available for use in the UK.
For information on the US sanctions announced between February 24 and 26, 2022, see this Steptoe blog post.
For information on EU sanctions announced on February 25, 2022, see this Steptoe blog post.
Visit this link to sign up to receive a recording of Steptoe’s recent webinar “Possible Sanctions Against Russia: What You Need to Know.”
Following Russia’s invasion of Ukraine, the EU has adopted a much more severe sanctions package against Russia than the measures adopted on February 23, 2022 (see our previous previous blog post). The new measures provide for various restrictions, including additional targeted restrictions against specified individuals; expanded financial measures aiming at cutting Russia’s access to the EU capital markets; trade restrictions targeting the energy and aviation sectors and banning most exports of dual-use items, as well as certain semiconductors and cutting-edge technologies from the EU to Russia.
The key aspects of the new sanctions imposed by the EU are summarized below. Unless otherwise specified, references to Annexes in the below overview refer to Annexes to Council Regulation (EU) No 833/2014 (as amended or inserted by Council Regulation (EU) 2022/328 of February 25, 2022).
The United States government has continued to impose numerous economic sanctions and export controls measures following Russia’s invasion of Ukraine. On February 24, 2022, the US Commerce Department’s Bureau of Industry and Security (BIS) significantly expanded export controls applicable to Russia. On February 25, 2022, the US Treasury Department’s Office of Foreign Assets Control (OFAC) added Russian President Vladimir Putin and others to the Specially Designated Nationals (SDN) List. It also imposed significant economic sanctions measures targeting Russia’s financial system — including by imposing sanctions on Russia’s largest financial institutions and limiting the ability of certain Russian state-owned and private entities to raise capital. Together, OFAC’s actions, which were taken pursuant to Executive Order (EO) 14024 following Russia’s invasion of Ukraine, are estimated to affect nearly 80 percent of all banking assets in Russia.
Finally, on February 26, 2022, the United States and European Union countries, together with the United Kingdom and Canada, announced an agreement to block certain Russian banks from access to SWIFT (with Japan also agreeing the following day), to impose sanctions on Russia’s Central Bank, and to limit the ability of certain Russian nationals connected to the Russian government to obtain citizenship in their countries. They further agreed to ensure effective transatlantic coordination in implementing sanctions, including by sanctioning additional Russian entities and persons, and by working together and with other governments around the world to identify and freeze sanctioned Russian assets.
On February 24, 2022, the UK government announced the designation of a further five individuals and six entities under the Russia (Sanctions) (EU Exit) Regulations 2019, following Russia’s invasion of Ukraine.
The sanctions target companies and senior executives operating in Russia’s banking and defence sectors involved in the destabilization of Ukraine or in obtaining a benefit from, or supporting, the Government of Russia. Three of the five individuals and three of the six companies already were sanctioned by the United States.
On February 23, 2022, the White House announced sanctions on the Nord Stream 2 pipeline following the announcement that Germany would halt certification of the project. Shortly after, the US Treasury Department’s Office of Foreign Assets Control (OFAC) named Nord Stream 2 AG and its managing director as Specially Designated Nationals (SDNs) pursuant to the Protecting Europe’s Energy Security Act (PEESA) and Executive Order (EO) 14039 of August 20, 2021. OFAC also issued General License No. 4 (GL-4) under EO 14039 authorizing US persons to engage in transactions that are ordinarily incident and necessary to the wind down of transactions involving Nord Stream 2 AG and any entity owned 50 percent or more by it, until March 2, 2022.
The day before, on February 22, 2022, OFAC named more than 40 entities, five individuals, and five vessels as SDNs under EO 14024 of April 15, 2021. The targets included two banks: Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB). US persons are prohibited from engaging in any transfer, transaction, export, import, withdrawal, or other dealing involving property or interests in property of SDNs, including the two banks and Nord Stream 2 AG, and if in the possession of a US person or otherwise in the United States, such property or interest in property must be blocked and reported to OFAC in no more than ten days. The prohibitions also apply to any legal entity owned 50 percent or more by one or more SDNs, even if not specifically named or included on the OFAC SDN list.
As the Ukraine Crisis continues to deteriorate following the Russian decision to recognise the Ukrainian regions of Donetsk and Luhansk as independent entities and officially deploying Russian troops, the EU has imposed its first set of sanctions. Also the US and the UK have imposed sanctions. The present blog post addresses the sanctions package that was adopted by the EU late on 23 February 2022. The EU, like other jurisdictions, is expected to issue additional sanctions shortly, and we will keep reporting on those.
The below Q&A provides you with all the information you need to gain a quick understanding of the EU’s Russia sanctions package of 23 February 2022.
On February 22, 2022, UK Prime Minister Boris Johnson announced the designation of five Russian banks and three high net worth individuals under the recently expanded Russia (Sanctions) (EU Exit) Regulations 2019 (see our previous blog post on the UK’s expanded sanctions powers here). The announcement follows the Russian government’s recognition of the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) and placement of Russian military forces in those territories for purported peacekeeping operations.
The sanctions target Russian banks and high net worth individuals involved in the destabilization of Ukraine or in obtaining a benefit from, or supporting, the Government of Russia. All three individuals and four of the five banks (with the exception of PJSC Promsvyazbank) already were sanctioned by the United States.
On February 21, 2022, the White House issued a new Executive Order (EO) imposing comprehensive sanctions on the disputed Donetsk and Luhansk regions of Ukraine following President Vladimir Putin’s announcement that Russia would recognize the independence of the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) and place Russian military forces in those territories for purported peacekeeping operations.
The new EO prohibits:
- new investment in the DNR or LNR by US persons, wherever located;
- the importation into the United States, directly or indirectly, of any goods, services, or technology from the DNR or LNR;
- the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a US person, wherever located, of any goods, services, or technology to the DNR or the LNR; and
- any approval, financing, facilitation, or guarantee by a US person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a US person or within the United States.