On 30 September, the UK government announced the upcoming expansion of sanctions against Russia.13 The new sanctions measures are designed to cut Russia’s access to several services from sanctions-imposing countries including the UK. Specifically, the UK government:
- Prohibited the provision of the following services to Russia: IT consultancy services, architectural services, engineering services, advertising services, transactional legal advisory services, and auditing services . The UK government press release announced that Russia has imported 67% of such services from countries that are now imposing sanctions on Russia, including the UK;
- Imposed blocking sanctions on the Governor of the Central Bank of the Russian Federation;
- Imposed prohibition on the export of almost 700 types of goods that are critical for production in Russia’s manufacturing sector from the UK to Russia. Based on the UK government, the goods that were sanctioned as part of actions on this day represent over GPB 200 million of the trade volume between Russia and the UK last year; and
- Announced that it is working to finalize the Russian oil price cap mechanism in cooperation with other G7 countries.
- On 26 September, the Office of Financial Sanctions Implementation (“OFSI”) imposed asset freeze sanctions on 92 individuals and entities in response to the Russian regime conducting sham referendums in four regions of Ukraine.14
Key Implications
Following Russia’s attempt to annex four regions of Ukraine by staging sham referendums in those regions, the United States, EU, and UK — the main sanctions-imposing authorities — responded swiftly by introducing several new sanctions that include new blocking sanctions against individuals and entities that were involved in Russia’s annexation effort, new prohibitions on the provision of major services to Russia, and additional trade-related controls. The latest expansions have further narrowed the scope of permissible activities with Russia, increasing the burden of conducting legal analysis of permissibility of contemplated activity for anyone who continues doing business with Russia. Most of the activities that relate to Russia — apart from specific humanitarian activities — are now restricted under the sanctions laws of at least one western country or its allies. Even though the U.S., EU, UK and other G7 countries are taking actions in concert, the scope of their respective sanctions varies. As a result, any activity that relates to Russia needs to be assessed diligently across different jurisdictions.
The major sanctions-imposing authorities – especially the U.S. and EU – have been vocal about their intent to impose sanctions on those who help Russia evade sanctions. The announced recent rounds of designations prove that they are willing to deliver on that message. This means, even in the absence of any nexus with countries imposing extensive Russia sanctions, the risk of conducting business with Russia continues to increase. Parties should not only evaluate their potential nexus to various jurisdictions that have imposed sanctions (i.e., analysis of the primary enforcement risk), but also need to consider the risk of being targeted in cases where no such nexus exists.
The Russia sanctions have an unprecedented focus on strategic trade controls. Such controls are aimed at limiting the ability of Russia to continue to produce military and technology items for subsequent use in its war efforts, as well as limiting Russia’s ability to pivot its production and exports to third countries that continue trade with Russia. Companies that engage in export/import and related services should ensure they have clear understanding of all the restrictions if they choose to continue doing business with Russia. Companies worldwide should know and screen their customers to ensure their counterparts are not on any regulator list or acting on their behalf. It is also advisable to conduct training for personnel so that they are aware of red flags indicating potential attempts by Russia or Belarus to circumvent trade controls and backfill their depleted inventories. Finally, financial institutions also should pay attention to payments linked to trade transactions to ascertain that they are not involved in transactions related to prohibited imports or exports.
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1 G7 Leaders’ Statement (23 September 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/23/g7-leaders-statement-3/
2 Russia-related Designations and Designations Updates; Publication of Russia-related Frequently Asked Question (30 Sept. 2022), https://home.treasury.gov/news/press-releases/jy0981
3 FAQ 1091 (30 September 2022), https://home.treasury.gov/policy-issues/financial-sanctions/faqs/1091
4 https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3146-2022-09-30-bis-press-release-bis-adds-57-to-entity-list-final/file
5 BIS FAQ ( 30 September 2022), https://www.bis.doc.gov/index.php/documents/about-bis/3145-2022-09-30-bis-faq-third-country-application-of-controls/file
6 DOJ Press Releases, Russian Oligarch Oleg Vladimirovich Deripaska and Associates Indicted for Sanctions Evasion and Obstruction of Justice (29 September 2022), https://www.justice.gov/opa/pr/russian-oligarch-oleg-vladimirovich-deripaska-and-associates-indicted-sanctions-evasion-and
7 Russia-related Designations; Issuance of Russia-related General License and Frequently Asked Questions; Zimbabwe-related Designation, Removals and Update; Libya-related Designation Update (15 September 2022), https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220915
8 Determination Pursuant to Section 1(a)(i) of Executive Order 14024 (15 September 2022), https://home.treasury.gov/system/files/126/determination_09152022_eo14024.pdf
9 Determination Pursuant to Section 1(a)(ii) of Executive Order 14071 (15 September 2022), https://home.treasury.gov/system/files/126/determination_09152022_eo14071.pdf
10 OFAC’s Frequently Asked Questions, FAQ1082 (15 September 2022), https://home.treasury.gov/policy-issues/financial-sanctions/faqs/1082
11 Implementation of Additional Sanctions Against Russia and Belarus Under the Export Administration Regulations (EAR) and Refinements to Existing Controls, 87 FR 57068, https://www.federalregister.gov/documents/2022/09/16/2022-19910/implementation-of-additional-sanctions-against-russia-and-belarus-under-the-export-administration
12 Press statement by President von der Leyen on a new package of restrictive measures against Russia (28 September 2022), https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_22_5856
13 Sanctions in response to Putin’s illegal annexation of Ukrainian regions (30 September 2022), https://www.gov.uk/government/news/sanctions-in-response-to-putins-illegal-annexation-of-ukrainian-regions
14 UK sanctions collaborators of Russia’s illegal sham referendums (26 September 2022), https://www.gov.uk/government/news/uk-sanctions-collaborators-of-russias-illegal-sham-referendums
