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24 de marzo de 2023 • 48 minute read

Global Sanctions Update

Written by:Nathan BushMarc LagerRichard SternebergChloe BarkerDavide RossettiRichard NewcombIgnacio SanchezRamsey Jurdi

Our International Trade team have summarised the latest developments in global sanctions and how to navigate the implications on your business.

The information included is accurate at the time of drafting but given the fluid nature of the situation, the information should remain under constant review.

To receive regular updates on global sanction developments subscribe to the series. Past alerts in the series are available.

This edition includes updates from the following jurisdictions:

Australia

This content was last updated on 4 March 2022.

Measures which have been implemented in Australia

On 24 February 2022, the Australian Government implemented its first sanctions against Russia.

  • On 24 February 2022, the Australian Government made the Autonomous Sanctions Amendment (Russia) Regulations 2022 (Regulations), which amended the Autonomous Sanctions Regulations 2011 to broaden the scope of individuals and entities on which Australia can impose targeted financial sanctions and travels bans. These sanctions now extend to:
  1. a person (or a member of their immediate family) or entity that the Minister is satisfied is, or has been, engaging in an activity or performing a function that is of economic or strategic significant to Russia; or
  2. a current former Minister or senior official of the Russian Government (or their immediate family members.
  • These amendments take effect to impose the following punitive measures on particular individuals and entities:
    • restrictions on trade in goods or services;
    • restrictions on engaging in commercial activities;
    • targeted financial sanctions (including asset freezes; and
    • travel bans.
  • The Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Ukraine) List 2014 (List) was amended on 24 February 2022 to include the following members of Russia Security Council who had provided “advice and justification” to the Russian Government which led President Putin to recognise the breakaway republics:
  1. Dmitry Anatolyevich Medvedev;
  2. Yury Yakovlevich Chaika;
  3. Aleksander Vladimirovich Gutsan;
  4. Igor Anatolyevich Komarov;
  5. Anatoly Anatolyevich Seryshev;
  6. Igor Olegovich Shchegolev;
  7. Viktor Vasilyevich Zolotov; and
  8. Vladimir Vladimirovich Yakushev.
  • Sanctions were also imposed to prevent Australian individuals and entities from conducting business with the following banks (including freezing assets):
  1. Promsvyazbank;
  2. Industrial Savings Bank;
  3. Genbank; and
  4. Black Sea Bank for Development and Reconstruction.

Further sanctions were imposed on individuals and entities between 25 February 2022 and 27 February 2022.

  1. President Vladimir Vladimirovich Putin;
  2. Sergei Viktorovich Lavrov;
  3. Vladimir Kolokoltsev;
  4. Mikhail Vladimirovich Mishustin; and
  5. Sergei Kuzhugetovich Shoigu.
  • The Australian sanctions regime and the complete List pf individuals and entities sanctioned in connection with the Ukraine crisis can be found of the DFAT website accessible here.

Measures which have been announced but not yet implemented in Australia

  • The Australian Government is also making amendments to the Regulations to extend existing sanctions that apply to Crimea and Sevastopol to Donetsk and Luhansk. This will include sanctions prohibiting trade in the transport, energy, telecommunications, and oil, gas and mineral sectors in the regions of Donetsk and Luhansk. These sanctions measures will be in effect from 28 March 2022
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EU

This content was last updated on 26 June 2023.

On 23 June 2023, the EU adopted the long discussed eleventh sanctions package targeting Russia. The new sanctions package is intended to focus on anti-circumvention measures but also includes new listings, derogations and prohibitions.

Targeted sanctions

The EU added 71 persons and 33 entities to its asset freeze list in accordance with the restrictive measures of Regulation (EU) 269/2014. The list of newly listed persons and entities can be found here.

The new listings include:

  • Russian IT companies
  • Military officials
  • Persons involved in the deportation of Ukrainian children to Russia

Furthermore, a new criterion for the listing has been introduced targeting the Russian IT-sector and expanding the criterion targeting circumvention, which now includes natural or legal persons “otherwise significantly frustrating” the restrictive measures. Third country entities that facilitate restricted goods reaching Russia may fall under the latter criterion.

Further derogations from the asset freeze were introduced. Noticeably, competent authorities can authorize the release of such funds for the set-up, certification or evaluation of a firewall removing a listed person´s or listed entity’s control over the assets of a (non-listed) EU-entity and ensuring that no funds or economic resources accrue for the benefit of the listed person or entity, thus allowing the EU-entity to continue its business operations.

Sectoral sanctions

The EU is now addressing the circumvention of its restrictive measures through third countries by foreseeing, as a last resort, a prohibition to sell, supply, transfer or export specified sanctioned goods to third countries that continue to represent a high risk for circumvention.

New derogations also allow the competent authorities to authorize certain otherwise restricted services for the setting-up, certification or evaluation of a firewall that – as described above – removes the control of a listed person or entity over a non-listed EU-entity and ensures that no funds or economic resources accrue for the benefit of the listed person/entity.

Further amendments of the eleventh sanctions package include:

  • Prohibition to sell, license or transfer intellectual property rights or trade secrets in regard to restricted goods
  • Prohibition of transit for certain restricted goods via Russia to third counties
  • Vessels will be denied access to ports and locks in the EU if there is reasonable suspicion that the vessel is violating the ban on importing seaborne Russian crude oil by illegally interfering with its shipborne automatic identification system or via a ship- to-ship transfer
  • Further restriction on imports of iron and steel by requiring from importers evidence of the country of origin of the iron and steel inputs used for processing in third countries
  • Providing some derogations in relation to the Caspian Pipeline Consortium
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Japan

This content was last updated on 7 March 2022.

Measures which have been implemented in Japan

  • The Ministry of Foreign Affairs of Japan (MOFA), Ministry of Economy, Trade and Industry (METI) and Ministry of Finance Japan (MOF) have jointly announced sanctions measures on behalf of the Government of Japan (GoJ) to address the ongoing conflict in Ukraine.

Measures announced on 26 February 2022

  • The main target of the measures are individuals and organizations with ties to the so called Donetsk and Luhansk People’s Republics.

1. Freezing assets and related measures

a) Payments and receipt of payments made by those designated by MOFA’s notice shall require clearance by either the Head of MOF or METI in order to be executed. The list of designated individuals and an organization are here (individuals/organization)

b) Capital transactions (such as concluding deposit contracts, trust contracts, and facility loan contracts) with those designated by the MOFA’s notice shall require clearance by either the Head of MOF or METI in order to be executed. The list of designated individuals and an organization are same as above

Note that above measures for Bank Rossiya will be enforced on 28 March 2022.

2. Export and Import controls

  • Any imports are exports to or from the so called Donetsk and Luhansk People’s Republics are prohibited.  

3. Regulations against the Government of the Russian Federation from issuing and circulating new securities in Japan

a) Regulations on the issuance and offering of securities

The issuance and offering of securities within Japan made by Government of the Russian Federation and its related agencies (the GoR) designated by the MOFA’s notice shall require clearance by the Minister of Finance.

b) Regulations on the acquisition or transfer of securities

Regarding securities newly issued by the Government, the issuance of securities made by Japanese resident and offering of securities made by non-resident shall require clearance by the Minister of Finance. 

c) Regulations on service transactions

The provision of labor or services by residents for the issuance or offering of new securities in Japan by the Government shall require clearance by either the Head of MOF or METI in order to be executed.

4. Measures to prohibit certain banks of the Russian Federation from issuing securities in Japan

  • With respect to certain banks (designated in 2014 when the conflict in Crimea occurred)in the Russian Federation that are prohibited from issuing securities, etc. in Japan, securities with shorter redemption periods (more than 30 days) will require clearance by the Minister of Finance

5. Regulations on the prohibition of exports to the Russian Federation of items subject to the Multilateral Export Control Regime

  • With regard to exports and provision to the Russian Federation of goods and services subject to the Multilateral Export Control Regime, the screening procedures will be further tightened, and prohibition of exports will be introduced. Specifically, exports of goods and provision of technology to the Russian Federation are no longer subject to a blanket permit and now required a separate permit procedure.

Updates announced on 1 March 2022

1. Freezing assets and related measures

a) Payments and receipt of payments made by those designated by the MOFA’s notice shall require clearance by either the Head of MOF or METI in order to be executed. The list of designated individuals and an organization are here.

b) Capital transactions (such as concluding deposit contracts, trust contracts, and facility loan contracts) with those designated by the MOFA’s notice shall require clearance by the Minister of Finance. The list of designated individuals and an organization are same as above.

Note that above measures for the Promsvyazbank and Vnesheconombank will be enforced on 31 March 2022.

2. Regulations on the receipt of payments for exports

a) Receipts of payments for exports to certain organizations in the Russian Federation designated by the MOFA will require clearance by the Minister of Finance after 8 March  2022.

3. Export control (will implemented soon)

a) Introduce a ban on the export of general-purpose products that are considered to contribute to the strengthening of the military capabilities of the Russian Federation.

Updates announced on 3 March 2022

1. Freezing assets and related measures

a) Payments and receipt of payments made by those designated by the MOFA’s notice shall require clearance by either the Head of MOF or METI in order to be executed. The list of designated individuals and an organization are here (Russia/Belarus/Donetsk and Luhansk).

b) Capital transactions (such as concluding deposit contracts, trust contracts, and facility loan contracts) with those designated by the MOFA’s notice shall require clearance by the Minister of Finance. The list of designated individuals and an organization are same as above.

Note that above measures for the newly designated organization as certain banks of the Russian Federation will be enforced on 2 April 2022. 

2. Regulations on the prohibition of exports to Belarus of items subject to the Multilateral Export Control Regime

a) With regard to exports and provision to the Belarus of goods and services subject to the Multilateral Export Control Regime, the screening procedures will be further tightened, and prohibition of exports will be introduced. Specifically, exports of goods and provision of technology to Belarus are no longer subject to the blanket permit and now required a separate permit procedure.

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New Zealand

This content was last updated on 4 March 2022.

Measures which have been implemented in New Zealand

  • New Zealand does not have an autonomous sanctions regime or general legislative power that allows the Government to impose unilateral trade and financial sanctions in the absence of a United Nations Security Council Resolution. New Zealand would implement any UNSC sanctions in the unlikely event these are issued.
  • There are a limited range of unilateral measures that New Zealand can impose – such as diplomatic sanctions, suspension of aid or refusal of entry visas.
  • Domestic measures announced by the New Zealand Ministry of Foreign Affairs and Trade to date are accessible here and here. In summary, as at 4 March 2022 they are:
  • Export controls
  • There is a prohibition on export of all goods intended for use by the Russian military/security/paramilitary/police/militia.
  • This applies to the end-user, independent of intermediaries. It also applies to dual-use technologies that may have a military application.
  • Travel bans
  • Certain (unnamed) individuals who have been banned from travel to NZ.
  • Foreign Ministry consultations
  • As a first step, New Zealand has suspended bilateral foreign ministry consultations with Russia until further notice.  

Measures which have been announced but not yet implemented in New Zealand

  • There are no additional measures that have been announced but not yet implemented. However, the New Zealand Government has stated that it intends to introduce new legislation to facilitate further sanctions. This is being considered by Cabinet on Monday, 7 March 2022. The further changes signalled include:
  • Targeting of existing Russian investment in New Zealand including measures to target financial institutions and potentially Russian individuals;
  • Preventing foreign investment in Russia and Russian investment in New Zealand; and
  • Involvement of the Overseas Investment Office in specific cases. 
 
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Singapore

This content was last updated on 7 March 2022.

Measures which have been implemented in Singapore

  • On 5 March 2022, Singapore’s Ministry of Foreign Affairs announced the details of the sanctions and export controls against Russia. The financial measures are targeted at designated Russian banks, entities and activities in Russia, and fund-raising activities benefiting the Russian government. The Singapore Government, under its Strategic Goods Control System, will impose a ban on the transfer of military and dual-use goods, including items that can contribute to offensive cyber operation, to Russia.

Singapore’s Financial Measures in Relation to Russia

  • Under these measures, all financial institutions in Singapore, including banks, finance companies, insurers, capital markets intermediaries, securities exchanges, and payment service providers are prohibited from:

a) Entering into transactions or establishing business relationships with the following four (4) Russian banks:

  • VTB Bank Public Joint Stock Company;
  • The Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank;
  • Promsvyazbank Public Joint Stock Company; and
  • Bank Rossiya.
  • Where there are existing business relationships, financial institutions must freeze any assets and funds of these four banks.

b) Providing financing or financial services in relation to the export from Singapore or any other jurisdiction of goods subject to Singapore’s export controls on Russia. These goods comprise all items in the Military Goods List and specified categories in the Dual-Use Goods List of the Strategic Goods (Control) Order 2021.

c) Providing financial services in relation to designated Russian non-bank entities which are involved in activities in (b). Where there are existing business relationships, financial institutions must freeze any assets and funds of these designated entities. Details on the designation of non-bank entities will be provided subsequently.

d) Entering into transactions or arrangements, or providing financial services that facilitate fund raising by:

  • the Russian government;
  • the Central Bank of the Russian Federation;
  • any entity owned or controlled by them or acting on their direction or behalf.
  • The prohibitions apply to buying and selling new securities, providing financial services that facilitate new fund raising by, and making or participate in the making of any new loan to the above entities. The Singapore Government and Monetary Authority of Singapore will also cease investing in newly issued securities of the above entities.

e) Entering into transactions or providing financial services in relation to the following sectors, in the breakaway regions of Donetsk and Luhansk

  • transport;
  • telecommunications;
  • energy; and
  • prospecting, exploration and production of oil, gas and mineral resources.

f) Entering into or facilitating any transactions involving cryptocurrencies, to circumvent any of the above prohibitions in (a) to (e). The prohibited cryptocurrency transactions cover all transactions that involve cryptocurrencies and extend to the payment and settlement of transactions that relate to digital assets (such as non-fungible tokens).

  • The Monetary Authority of Singapore will issue directions to all financial institutions shortly, setting out the details of the above measures (a)-(f).

Singapore’s Export Controls Measures on Russia

  • The Singapore Strategic Goods Control System regulates the transfer (export, transit, and transshipment) of strategic goods which are generally military weapons or their parts as well as high technology goods which could be used for both commercial and military purposes. Items subject to strategic goods control are listed in the Strategic Goods (Control) Order (SGCO) 2021.
  • In order to constrain Russia’s capacity to conduct its war in Ukraine and cyber aggression, all permit applications to Russia involving (a) all items on the List of Military Goods under the SGCO; and (b) all category codes under Category 3 - Electronics, Category 4 - Computers and Category 5 – Telecommunications and “Information Security” on the List of Dual-Use Goods under the SGCO will be rejected. Please refer to the SGCO for the descriptions of the items in the affected category codes.
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South Korea

This content was last updated on 4 March 2022.

Measures which have been implemented in South Korea

  • On 28 February 2022, the government of South Korea announced that it would join international sanctions against Russia. To that end, on 1 March 2022, the Ministry of Economy and Finance of South Korea announced the details and substance of the sanctions which were determined based on close consultation with the U.S. Department of Treasury. 
  • These sanctions prohibit South Korean financial institutions, both public and private, from:
  1. transacting with seven major Russian banks (Sberbank, Vnesheconombank (VEB), Promsvyazbank (PSB), VTB Bank, Bank Otkritie, Sovcombank, Novikombank and their affiliated entities) subject to the U.S. wind-down periods and the U.S. General Licenses applicable to each entity;
  2. investing in Russian treasury bonds; and
  3. executing transactions with Russian banks using the SWIFT messaging system by implementation of the sanctions that would be imposed by the EU. In addition, the Ministry of Trade, Industry and Energy announced that it would implement ban Korean companies from exporting strategic materials to Russia.
  • Given the unprecedented nature of these measures, financial institutions, businesses and persons in South Korea are advised to take all necessary steps to ensure that these measures can be effectively implemented including providing prior notification to customers, setting up of and managing internal controls procedures and transactions monitoring systems, and performing customer due diligence.
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UK

This content was last updated on 22 March 2023.

 

OFSI Releases Updated Guidance on Ownership and Control Assessments

The Office of Financial Sanctions Implementation (OFSI) has recently updated its Enforcement and Monetary Penalties guidance. This now includes new guidance on how OFSI will assess determinations on ownership and control by UK sanctioned individuals and entities when considering enforcement action. It also looks at the extent to which due diligence will be considered a mitigating (or aggravating) factor.

A key compliance challenge for companies is identifying the ownership and control structure of counterparties. This is particularly relevant in the context of Russia. Additional guidance from OFSI on these issues is therefore a welcome development.

 

Ownership and Control – the Test

The updated guidance does not change the underlying test for ownership and/or control, which is established under legislation and for which guidance is included in OFSI’s general guidance for financial sanctions. That guidance provides that an entity is directly or indirectly owned or controlled by another person in any of the following circumstances:

  • The person holds (directly or indirectly) more than 50% of the shares or voting rights in the entity;
  • The person has the direct or indirect right to appoint or remove a majority of the board of directors of the entity; or
  • It is reasonable to expect that the person would be able to ensure the affairs of the entity are conducted in accordance with the person’s wishes.

If any of the tests are met, and the person who owns or controls the entity is a UK designated (i.e., sanctioned) person, the entity must be treated as if it is a designated person for the purposes of UK asset freezing sanctions.

OFSI emphasises that there is no prescribed level of due diligence which must be undertaken to establish whether the test has been met. However, the updated guidance:

  • Confirms that OFSI may consider appropriate due diligence conducted on the ownership and control of an entity to be a mitigating factor in an enforcement context. Conversely, it also confirms that a failure to carry out due diligence may be considered an aggravating factor; and
  • Provides examples of the type of due diligence which OFSI will consider in a UK sanctions enforcement context.

 

Mitigating and Aggravating Factors

Where OFSI determines that a breach of UK sanctions has occurred, and it considers that an incorrect assessment of ownership and/or control has contributed to causing that breach, OFSI will consider the “degree and quality of research and due diligence” as either a mitigating or aggravating factor. This determines whether to impose a civil penalty, and/or the level of that penalty.

According to the new guidance, OFSI will consider appropriate due diligence on the ownership and control of an entity to be a mitigating factor where the determination reached was made in “good faith” and was a “reasonable” conclusion to draw. No guidance is provided on how “reasonable” will be interpreted. Equally, “a failure to carry out appropriate due diligence”, or the carrying out of any due diligence “in bad faith”, may be considered an aggravating factor.

 

Due Diligence

OFSI will consider whether the level of due diligence conducted was appropriate to the degree of sanctions risk and nature of the transaction. The nature of a person’s contractual or commercial relationship with the entity is also relevant to OFSI’s consideration of the measures undertaken. OFSI has confirmed that it would expect to see evidence of a decision-making process that took account of the sanctions risk and considered what would be an appropriate level of due diligence considering that risk. OFSI has stated that it would usually expect these decisions to be made by reference to an internal policy but recognises that there is no one-size-fits-all approach. OFSI expects scrutiny of information obtained as part of any ownership and control assessments, particularly where efforts appear to have been made by designated persons to avoid relevant thresholds.

OFSI has provided a list of “example areas of enquiry” to establish whether an entity is owned or controlled by a designated person, as follows:

Formal ownership and/or control

  • The percentage of shares and/or voting power of shareholders.
  • The ownership and distribution of other shares in a company.
  • Whether ownership/shareholding has recently been altered or divested, including in possible anticipation or response to financial sanctions. If so, consideration of whether this warrants further investigation into the possibility of joint arrangements or indirect or de facto control.
  • The composition of shares, and whether shares have been split into different classes, or other structural changes made.
  • Whether changes to ownership and/or control were part of a pre-planned or wider business/financial strategy.
  • Corporate constitutional documents, including articles of association or constitution.
  • Any commercial justifications for complex ownership and control structures.
  • Agreements between shareholders or between any shareholders and the entity (e.g., shareholders’, joint venture, operating, or guarantee agreements).

Indirect or de facto control

  • Indications of continued influence (or the potential for it) by a designated person, including through personal connections and financial relationships.
  • The presence or involvement of proxies, including persons holding assets on behalf of a designated person.
  • Ownership, holdings of shares, or control by trusts associated with a designated person.
  • If shares or other ownership interests of a designated person have been divested, the nature of any relationships and prior involvement of the person benefitting.
  • If applicable, how recent transfers of shares were funded and whether this was done at an accurate and true valuation.
  • Any operational steps taken to ensure that the designated person cannot exercise control over the entity and/or that the designated person cannot benefit from, or use, corporate assets.
  • Information relating to the circumstances of board and/or management appointments, including the backgrounds, relevant experience, and relationships with designated persons.
  • The running of board meetings and governance processes, including board or shareholders’ meeting minutes concerning recent changes in the entity’s ownership and control relating to the designated person.
  • Ongoing financial liabilities directly related to a designated person, e.g., personal loans, loan guarantees, property holdings, equipment etc.
  • Other shareholder agreements, voting agreements, put or call options or other coordination agreements in place between the entity and the designated person or controlled entities.
  • Whether there are any benefits conferred to the designated person by the entity or transactions between the entity and the designated person.

Where relationships or activity is ongoing, OFSI also notes that it expects that due diligence and assessments are reviewed at appropriate times. The update guidance notes that “ownership and control is not static” and that OFSI’s consideration of the due diligence undertaken will consider the regularity of checks and ongoing monitoring.

The updated guidance further notes that OFSI “may” consider any and/or all of the following actions as potentially mitigating:

  • An examination of the formal ownership and control mechanisms of an entity to establish whether there is available evidence of ownership and control by a designated person.
  • An examination of actual, or the potential for, influence or de facto control over an entity by a designated person.
  • Open-source research on an entity and any persons with ownership of, or the ability to exercise control over, the entity, together with an examination of whether such persons are, or have links to, designated persons such that further investigation may be warranted.
  • Direct contact with the entity and/or other relevant entities to probe into indirect or de facto control, including, seeking commitments by UK persons as to the role of any designated person or person with links to a designated person.
  • Regular checks and/or ongoing monitoring of the above where appropriate.

 

Practical steps for companies

Companies should ensure that:

  • Appropriate risk assessments are conducted on a periodic basis assessing the company’s exposure to direct or indirect dealings with designated persons.
  • A proportionate sanctions policy is in place, tailored to the conclusions of the risk assessments.
  • Appropriate counterparty due diligence and sanctions screening procedures are implemented and monitored on a regular basis.

 

In anniversary move, EU and UK announce further sanctions targeting Russia

On 25 February 2022, the EU agreed its 10th package of sanctions measures. The measures have been introduced via amendments made to a number of existing regulations.

What are the key practical implications?

  • Counter-party screening must be updated to ensure the new asset freezes have been taken into account. Enhanced due diligence on ‘at risk’ transactions must extend to the financial institutions involved in the flow of funds.
  • The derogations in respect of divestment activities will have important consequences for professional services providers and in-house personnel alike.
  • Those involved in the supply of goods (or contingent services, e.g., financing/insurance) to Russian persons or to or for use in Russia must ensure those products are checked against the updated regulations. Wind-down periods – where they exist – only apply to pre-existing contracts, not to new orders/supply agreements.

A summary of the scope and effect of the new measures is as follows:

Additional Asset-freezing Measures

Further asset-freezing measures have been imposed on individuals, including:

  • 87 individuals and 34 entities designated under Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (Council Implementing Regulation (EU) 2023/429). The list includes:
    • Members of the Federation Council of the Russian Federation, Russian Deputy Ministers and further government officials;
    • Lenara Ivanova, Vyacheslav Dukhin, Viktoria Yakimova and other individuals deemed to be responsible for the deportation and forced adoption of Ukrainian children;
    • Tinkoff Bank, Alfa-Bank, Rosbank, the National Wealth Fund of the Russian Federation and the Russian National Reinsurance Company and other significant economic actors;
    • Individuals and organisations deemed responsible for the spread of misinformation; and
    • Certain Iranian nationals, including Abualfazl Nazeri and Ghassem Damavandian, deemed to be involved in the supply of drones to Russian forces.
  • Ivan Maslov, the head of the Wagner Group in Mali, who has been designated under the EU’s Mali regime (Council Implementing Regulation (EU) 2023/428); and
  • 8 further individuals (including Maxim Shugaley) and 7 entities (including the Foundation for the Defence of National Values (FDNV)) with alleged links to the Wagner Group in Sudan and the Central African Republic, who have been designated under the EU’s Global Human Rights regime (Council Implementing Regulation (EU) 2023/430).

Trade Measures

Council Regulation (EU) 2023/427 has imposed additional restrictions on the trade in certain goods and connected services via amendments to Council Regulation (EU) No 833/2014.1 These new measures include:

  • Further goods have been added to Annex VII (goods and technology which might contribute to Russia’s military and technological enhancement, or the development of the defence and security sector);
  • A new Part D has been added to Annex XI (goods and technology suited for use in aviation or the space industry), thereby extending the restrictions to turbojets, turbopropellers and their parts. In respect of these new goods, a wind-down period applies to the execution until 27 March 2023 of contracts concluded before 26 February 2023;
  • A new Part C has been added to Annex XXI (goods which generate significant revenues for Russia), thereby extending the restrictions to items including petroleum jelly, petroleum coke, bitumen and asphalt and synthetic rubber. Specific wind-down periods apply for each of these new items; and
  • In Annex XXIII (goods which could contribute in particular to the enhancement of Russian industrial capacities), Part A has been replaced and a new Part C added, including flat-rolled products of iron or non-alloy steel, certain turbines, vacuum pumps, cranes, lathes and boring machines. A wind-down period applies for some but not all of these Part C goods to the execution until 27 March 2023 of contracts concluded before 26 February 2023.

Other key amendments include:

  • 96 further entities (including non-Russian entities) have been added to the list of military end-users in Annex IV and thus are now subject to tighter export restrictions.
  • A prohibition on Russian nationals from holding any position in the governing bodies of EU critical infrastructures and entities.
  • A prohibition on providing gas storage capacity in the EU to Russian nationals, natural persons residing in Russia or legal persons or entities established in Russia (or an entity owned by or acting on behalf of the same). A wind-down period applies for operations that are strictly necessary for the termination by 27 March 2023 of pre-existing contracts.
  • The list of partner countries which are applying a set of export control measures substantially equivalent to those set out in Regulation (EU) No 833/2014 has been expanded to include Australia, Canada, New Zealand and Norway (Annex VIII).
  • The introduction of further restrictions on the imports of goods which generate significant revenues for Russia.
  • The extension of the suspension of EU broadcasting licences to RT Arabic and Sputnik Arabic (Annex XV).
  • A temporary licensing ground from the professional and business services ban (Article 5n) where such services are “strictly necessary” for the entity’s divestment from the Russian market or the wind-down of such activities. The effective wind-down period will last until 31 December 2023 and has certain exclusions.
  • The wind-down period for transactions, including sales, which are strictly necessary for the wind-down of a joint venture or similar legal arrangement concluded before 16 March 2022 involving an entity restricted by virtue of Article 5aa/Annex XIX has been extended to 31 December 2023.

In order to minimise circumvention of these and existing measures, the new Regulation also:

  • Prohibits the transit via Russia of dual-use goods and technology exported from the EU.
  • Introduces an obligation for aircraft operators to notify non-scheduled flights between Russia and the EU to competent authorities at least 48 hours prior to entering EU airspace.
  • Allows customs authorities to refuse the release of goods if they have reasonable grounds to suspect circumvention, and to refuse the re-export of the goods to Russia.

UK

On 24 February 2023, the UK announced a further package of sanctions measures, including asset freezing measures which entered into force with immediate effect and further trade restrictions where the implementing legislation is yet to be published.

Additional Asset-freezing Measures

92 additional entities and individuals have been added to the UK sanctions list, including:

  • Four banks: MTS Bank PJSC, Bank St Petersburg PJSC, Bank Uralsib PJSC, Bank Zenit PJSC.
  • Senior executives at Russian state-owned nuclear power company Rosatom, plus executives from Russia’s two largest defence companies Rostec and Almaz-Antey Corporation.
  • 6 Russian entities involved in the manufacture or repair of military equipment for Russia’s armed forces, including aviation and navy.
  • 20 executives of Gazprom and Aeroflot, including Gazprom Chairman.
  • 5 senior Iranian executives in Qods Aviation Industry, the company manufacturing the drones used in Ukraine.

Trade Measures

The new measures – which have yet to enter into force – include:

  • Export restrictions on “every item Russia has been found using on the battlefield to date”, including aircraft parts, radio equipment, and electronic components that can be used by the Russian military industrial complex, including in the production of UAVs.
  • Import restrictions on 140 new goods including iron and steel products processed in third countries.
  • Extending existing measures against Crimea, and non-government controlled territory in Donetsk and Luhansk oblasts, to target Russian controlled areas of Kherson and Zaporizhzhia oblasts.
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US

This content was last updated on 3 March 2022.

Measures which have been implemented in the US

Designated Persons / SDNs (individuals and entities subject to asset freezing i.e. blocking measures)

  • On February 22, over 50 parties were designated to the SDN List, including 44 entities, 3 individuals, and 5 vessels. The complete list of entities targeted can be found here. The individuals are:
  • Denis Aleksandrovich Bortnikov
  • Petr Mikhailovich Fradkov
  • Vladimir Sergeevich Kiriyenko
  • The entities designated include the following and their related companies:
  • Promsvyazbank PJSC
  • State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank
  • The vessels designated include the following:
  • Baltic Leader
  • Fesco Magadan
  • Fesco Moneron
  • Linda
  • Pegas
  • On 23 February Nord Stream 2 AG was designated pursuant to PEESA along with its CEO:
  • Nord Stream 2 AG (NS2, pipeline owner/operator)
  • Matthias Warnig (NS2 CEO) 
  • On 24 February OFAC designated a number of entities and individuals. The complete list of entities can be found here. This includes 4 Russian banks and their related companies:
  • VTB Bank
  • Otkritie
  • Novikom
  • Sovcom
  • Other Russian entities that were designated include:
  • Joint Stock Commercial Bank Novikombank
  • LLC Atlant S
  • LLC Inspira Invest A
  • The US designated 7 Russian individuals:
  • Yuriy Alekseyevich Soloviev
  • Sergei Sergeevich Ivanov
  • Andrey Patrushev
  • Ivan Igorevich Sechin
  • Alexander Aleksandrovich Vedyakhin
  • Andrey Sergeyevich Puchkov
  • Galina Olegovna Ulyutina
  • The US designated 16 Belarusian entities:
  • Belinvestbank
  • Belbizneslizing
  • Belinvest-Engineering
  • Bank Dabrabyt
  • Minsk Wheeled Tractor Plant
  • State Authority for Military Industry of the Republic of Belarus
  • State Owned Foreign Trade Unitary Enterprise Belspetsvneshtechnika
  • OJSC KB Radar-Managing Company Holding Radar System
  • 558 Aircraft Repair Plant
  • Integral
  • Industrial-Commercial Private Unitary Enterprise Minotor-Service
  • Oboronnye Initsiativy
  • OKB TSP Scientific Production
  • Synesis
  • 24x7 Panoptes
  • Sokhra
  • The US also designated 8 Belarusian individuals:
  • Aliaksei Ivanavich Rymasheuski
  • Aliaksandr Piatrovich Vetsianevich
  • Dmitry Aleksandrovich Pantus
  • Viachaslau Yevgenyevich Rassalai
  • Aliaksandr Yauhenavich Shatrou
  • Viktor Gennadievich Khrenin
  • Aleksandr Grigorievich Volfovich
  • Aliaksandr Mikalaevich Zaitsau
  • On 25 February the U.S. designated 4 high-level members of the Russian government. They include:
  • Vladimir Putin
  • Sergei Lavrov
  • Valery Gerasimov
  • Sergei Shoigu
  • On 28 February the U.S. designated one of Russia’s most important sovereign wealth funds, its affiliates, and CEO. Entities and individuals designated include:
  • The Russian Direct Investment Fund
  • JSC Management Company of the Russian Direct Investment Fund
  • LLC RVC Management Company
  • Kirill Dmitriev
  • On 2 March the U.S. announced that it would designate 22 Russian defense-related entities.

Additional Measures Imposed (i.e., territorial and sectoral sanctions, export controls)

  • On 21 February the US announced an immediate and near complete economic embargo of the Donetsk and Luhansk regions, including a prohibition on trade, investment or financing with or in the Donetsk and Luhansk regions.
  • On 22 February the US prohibited participation by US financial institutions in the secondary market for ruble or non-ruble denominated bonds issued after 1 March.
  • On 24 February The US prohibited transactions and dealings, by US persons or within the United States, in new debt of longer than 14 days maturity and new equity for the following 13 entities:
  • Sberbank
  • Gazprombank
  • Russian Agricultural Bank
  • Gazprom
  • Gazprom Neft
  • Transneft
  • Rostelecom
  • RusHydro
  • Alorsa
  • Sovcomflot
  • Russian Railways
  • Alfa-Bank
  • Credit Bank of Moscow  
  • The US imposed correspondent and payable-through account sanctions on Sberbank and its subsidiaries.
  •  The US announced newly expanded export controls to restrict most exports, reexports, and transfers of US goods, software and technology to Russia. Major changes include:
  • Expanded export license requirements for items subject to the EAR including products relating to semiconductors, IT data processing, healthcare, motor vehicles, and the marine and aviation sectors. The US will institute a default policy of denying license requests except in limited circumstances.
  • Restrictions on transactions of goods with military end users. Products of R&D facilities in third countries may now require a license to send goods to military end users in Russia if the goods are made with US technology or equipment.
  • Restrictions on exporting to specified Russian state-owned enterprises and aerospace and defense companies.
  • A near-total ban on exports to the Donetsk People’s Republic and Luhansk People’s Republic.
  • On February 26, the US and leaders of the European Commission, France, Germany, Italy, the United Kingdom, and Canada announced additional measures that are expected to be implemented soon. These include:
  • Removing select Russian banks from the SWIFT messaging system. The EU has voted to remove, as of March 2, VTB Bank, Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank and Sovcombank, and VEB.RF, from SWIFT.
  • Limiting the sale of citizenship (i.e., golden passports) by the EU countries to wealthy Russians
  • Launching a transatlantic task force to identify and freeze assets of sanctioned entities
  • On 28 February the U.S. prohibited U.S. persons from engaging in any transaction with, or on behalf of, large Russian financial entities. These include:
  • Central Bank of the Russian Federation
  • National Wealth Fund of the Russian Federation
  • Ministry of Finance of the Russian Federation
  • On 2 March the U.S. announced it would take a number of steps to further restrict exports to Russia and Belarus. These include:
  • Export controls on oil and gas extraction equipment in order to degrade Russia’s oil refining industry
  • Adding entities that have been involved with or supported the Russian and Belarusian security services or defense sectors to the Entity List
  • Extending previous restrictions put in place on Russia on February 24 (described above) to Belarus
  • The U.S. also announced that it would close off American air space to all Russian flights, including aircraft certified, operated, registered, or controlled by any person connected with Russia.

Legal source / reference

Comments

  • A general license has been issued that authorizes the wind-down of operations and certain limited activities in the Donetsk and Luhansk regions, expiring 23 March.
  • OFAC also issued 5 additional licenses authorizing certain other activities involving the region, such as transactions in medical goods.
  • OFAC has issued 2 general licenses allowing certain activities impacted by Directive 1A.
    A general license has been issued authorizing the wind-down of transactions involving Nord Stream 2, which expires 2 March.
  • OFAC has issued 10 general licenses authorizing various activities (including official business of certain organizations and entities, overflight payments, and exports of agricultural products).
  • Additionally, a license has been issued exempting certain transactions related to energy with certain entities whose assets were frozen. Entities exempted include the Central Bank of the Russian Federation, VTB Bank PJSC, PJSC Sberbank of Russia, Sovcombank OJSC, PJSC Bank Financial Corporation Otkritie, and State Corporation

Divergence

  • The US sanctions targeting the Donetsk and Luhansk regions are more far-reaching than corresponding EU measures. The US measures constitute a near complete economic embargo on the regions, whilst at present, the EU measures have focused on an import ban on goods from the regions, and a prohibition on certain investment and an export ban limited to certain sectors.
  • The US and UK have both targeted VTB Bank with asset freezing measures.
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Russian countermeasures

This content was last updated on 1 March 2022.

Measures which have been implemented as countermeasures by Russia

  • On 28 February 2022, the President of the Russian Federation signed an Order on Application of Special Economic Measures in Connection with the Unfriendly Actions of the United States of America and Foreign States and International Organisations which have sided with the United States (Order).
  • According to the preamble to the Order, the Order was adopted in connection with the actions of the US and other foreign states imposing restrictive measures against Russian citizens and legal entities.

Restrictive measures

  • The Order establishes the following restrictive measures:

1. Mandatory sale of foreign currency proceeds

  • Russia imposed a requirement on the mandatory sale of foreign currency proceeds of 80% of foreign currency credited to Russian residents' accounts with authorised banks under foreign trade contracts concluded with non-Russian residents for provision of goods, services and work to non-residents and for transfer of intellectual property to non-residents, including the exclusive rights to such property.
  • The mandatory sale of foreign currency proceeds must be carried out by the following deadlines:
  • in respect of the foreign currency credited to the accounts of residents (participating in foreign economic operations) starting from 1 January 2022, within three working days after 28 February 2022; and
  • in respect of the foreign currency credited to the accounts of residents (participating in foreign economic operations) on or after 28 February 2022, within three working days after the date of such receipt.
  • The procedure for the sale of foreign currency proceeds will be established by the Central Bank of the Russian Federation.

2. Restrictions on certain transactions

  • The Order prohibits the following transactions of Russian residents with effect from 1 March 2022:
  • foreign currency transactions relating to provision of foreign currency by residents to non-residents under loan agreements; and
  • residents crediting foreign currency to their accounts (deposits) with banks and other financial market institutions located outside the Russian Federation and making money transfers without opening a bank account using e-payment systems operated by foreign payment service providers.
  • A resident who performs such transactions in violation of the prohibition may be held administratively liable, which might lead to imposition of an administrative fine equal to between 75% and 100% of the amount of the illegal currency transaction or moneys transferred without opening a bank account using e-payment systems operated by foreign payment service providers.2
  • In our view, "resident" in the Order means resident within the meaning of the Federal Law on Currency Regulation and Currency Control, including:
  • individuals who are citizens of the Russian Federation;
  • foreign nationals and stateless persons permanently residing in the Russian Federation under a residence permit provided under the laws of the Russian Federation; and
  • legal entities established under Russian laws (except for foreign legal entities registered under the Federal Law On International Companies and International Foundations3) and the branches, representative offices and other subdivisions of such legal entities located outside of the Russian Federation.4

Relaxation of regulatory requirements on certain issues

  • The Order relaxes regulatory requirements on the following issues:

1. Buyback by a public joint-stock company of its outstanding shares

  • A public joint-stock company may, until 31 December 2022 inclusive, repurchase its outstanding shares (except for the repurchase of outstanding shares in order to reduce their total number) admitted to organised trading. The repurchase can take place if certain conditions are present, including if the weighted average price of the shares to be acquired (the value of the main stock market index calculated by the market operator) determined for any three months starting from 1 February 2022 has decreased by 20% or more compared to such weighted average price (the value of the main stock market index calculated by the market operator) for the three months starting from 1 January 2022.
  • Information on the repurchase by a public joint-stock company of its own shares doesn't have to be disclosed in the form of a statement of a material fact if so provided under a resolution of its board of directors or supervisory board on the repurchase of outstanding shares.
  • The Order contains a provision that certain provisions of Article 72 of the Federal Law on Joint-Stock Companies apply to the repurchase by a public joint-stock company of its outstanding shares.5 It appears unclear whether this implies that other provisions of Article 72 would not apply to such buybacks, for instance, the restriction on the buyback by the company of its shares if the nominal value of the company's outstanding shares will become less than 90% of the charter capital of the company.

2. Opening a bank account (deposit) without the individual's physical presence

  • The Order provides that credit institutions are entitled to open bank accounts/deposits for individuals without the need for them to be physically present in a situation where such individuals transfer funds from their bank accounts/deposits opened with one credit institution to another credit institution. This is possible if the credit institution that opens the new account/deposit is provided with the individual’s details established during their identification procedure.
  • We would be happy to advise you on how the provisions of this Order may affect your business.

 

1All references to Annexes are Annexes to Council Regulation (EU) No 833/2014
2 Clause 1 of article 15.25 of the Administrative Liability Code of the Russian Federation
3 Federal Law No. 290-FZ of 3 August 2018 "On International Companies and International Foundations" (as amended).
4 Subclause 6 of clause 1 of article 1 of Federal Law No. 173-FZ of 10 December 2003 "On Currency Regulation and Currency Control" (as amended).
5  Federal Law No. 208-FZ of 26 December 1995 "On Joint-Stock Companies" (as amended).

 

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