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February 21: The U.S. Responds to Russian Push in Eastern Ukraine
In response to President Putin’s televised recognition of Donetsk (DNR) and Luhansk People’s Republics (LNR) of Ukraine as “independent” nations and reports of Russian troops being ordered into Ukrainian territory, the United States has imposed Crimea-style comprehensive sanctions on the DNR and LNR prohibiting new U.S. investment, as well as imports and exports to and from the regions. The EU and the UK have sanctioned banks and oligarchs, and Germany has suspended certifications on the NordStream2 pipeline project.
The Donbas region of Eastern Ukraine has been divided since 2014 into separate territories, respectively controlled by the Ukrainian government and Russian-backed separatists. According to the Ukrainian government, armed conflict in the region has claimed over 14,000 lives and displaced more than 1.5 million people. The Minsk Agreements, negotiated by France and Germany in 2015 and signed by Russia and Ukraine, implemented a ceasefire but failed to entirely control the violence. As of February 2022, there have been increasing tensions on the Ukraine-Russia border and movement of Russian military troops into the region.
U.S. Executive Order
On February 21, 2022, President Biden issued an “Executive Order on Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine.” Specifically, the EO imposes broad sanctions on the DNR and LNR similar to sanctions for the Crimea territory. It prohibits the following:
- New investment in the so-called DNR or LNR regions of Ukraine by a United States person, wherever located;
- The importation into the United States, directly or indirectly, of any goods, services, or technology from the so-called DNR or LNR regions of Ukraine;
- The exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, services, or technology to the so-called DNR or LNR regions of Ukraine;
- And any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be covered by these prohibitions if performed by a United States person or within the United States.
The EO also provides authority to impose sanctions on persons determined:
- To operate or have operated since the date of the order in the so-called DNR or LNR regions of Ukraine;
- To be or have been since the date of the order a leader, official, senior executive officer, or member of the board of directors of an entity operating in the so-called DNR or LNR regions of Ukraine;
- To be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order;
- Or to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to this order.
The Department of Treasury also has issued six general licenses, including authorization for a “wind-down” until March 23, 2022, of operations, contracts and other agreements in effect prior to February 21, 2022. General licenses also provide for certain (a) exports to the regions of food, medicine and medical devices, (b) telecommunications and internet services to remain operational, and mail services to continue, (c) exports of services and software incident to personal communication over the internet, (d) aid activities by international organizations, and (d) foreign remittances.
A Coordinated Response with Europe
The U.S. Government has been coordinating with its international partners, including the European Union, the United Kingdom and Canada, to put pressure on the Russian regime
On February 22, 2022, the UK Office of Financial Sanctions Implementation (OFSI) issued a Financial Sanctions Notice and updated the OFSI consolidated list, designating eight new persons as subject to Russia Sanctions made under the UK Sanctions and Anti-Money Laundering Act 2018. Those designated include five Russian banks and three prominent oligarchs, namely:
- Gennady Nikolayevich Timchenko;
- Boris Romanovich Rotenberg;
- Igor Arkadyevich Rotenberg;
- Bank Rossiya;
- Black Sea Bank for Development And Reconstruction;
- Joint Stock Company GenBank;
- IS Bank; and
- Public Joint Stock Company Promsvyazbank.
Except for the Public Joint Stock Company Promsvyazbank, the above individuals and entities already were blocked under U.S. law and are now subject to an asset freeze; the individuals are subject to a travel ban in the UK.
On February 21, 2022, the European Council imposed restrictive measures on an additional five individuals for actively supporting actions and implementing policies that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. Those designated include members of the State Duma of the Russian Federation, who were elected to represent the illegally annexed Crimean Peninsula and the City of Sevastopol on September 19, 2021, as well as the head and deputy head of the Sevastopol electoral commission, namely: Aleksei Yurievich Cherniak, Leonid Ivanovic Babashov, Tatiana Georgievna Lobach, Nina Sergeevna Faustova and Aleksandr Evgenevich Chmyhalov. It is reported that the EU is “close to agreeing” on further sanctions targeting Russian banks and individuals.
Germany also has announced that it will halt certifications for the Nord Stream 2 Baltic Sea gas pipeline project, which is designed to double the flow of Russian gas directly to Germany.
The conflict on the Ukrainian border is rapidly evolving, and it is possible that further sanctions will be issued in the coming days. Per White House Press Secretary Jen Psaki, the February 21, 2022, executive order is “separate from and … in addition to the swift and severe economic measures we have been preparing in coordination with Allies and partners should Russia further invade Ukraine.” This is echoed by comments from UK Prime Minister Boris Johnson, who has referred to the above UK sanctions as the “first tranche, the first barrage of what we are prepared to do, and we hold further sanctions at readiness to be deployed alongside the U.S. and EU if the situation escalates still further.”
February 22: Further Sanctions Issued by the U.S. Government and Global Allies
On February 22 and 23, 2022, President Biden announced further sanctions in response to Russia’s invasion of Ukraine. These sanctions build upon the U.S. sanctions issued on February 21, 2022. Specifically, the additional sanctions include (a) blocking two Russian financial institutions and their subsidiaries, as well as five Russian individuals associated with the Putin regime; (b) expanded sanctions targeting Russian sovereign debt and persons who support such transactions; and (c) sanctions on Nord Stream AG and its CEO.
The United Kingdom, European Union, Canada, Australia and Japan have also issued or announced sanctions in response to Russia’s invasion. Further sanctions are likely if the situation in Ukraine continues to escalate.
Russian Financial Institutions
In accordance with President Biden’s February 22 announcement, the USDT’s Office of Foreign Assets Control (OFAC) sanctioned as Specially Designated Nationals (SDNs) two state-owned Russian financial institutions: State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), as well as 42 of their subsidiaries. OFAC also issued a general license authorizing transactions ordinarily incident and necessary to the wind-down of transactions with VEB and its subsidiaries through March 24, 2022.
As a result of the SDN designations, all property and interests in property that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, all transactions with and services by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons are generally prohibited.
Sovereign Debt Prohibitions
The February 22 announcement also provided for expanded sovereign debt prohibitions through the issuance of Directive 1A under Executive Order (E.O.) 14024. These restrictions expanded on the prohibitions in Directive 1 issued on April 15, 2021, which prohibited U.S. individuals and firms from participation in the primary markets for new Russian sovereign debt. As a result of Directive 1A, U.S. persons also are prohibited from participating in the secondary market for ruble or non-ruble denominated bonds issued after March 1, 2022, by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation.
Targeting Russian Regime Leaders and Their Adult Children
OFAC issued SDN designations for five Russian elites and their family members. These include: Denis Bortnikov, son of the Director of the Federal Security Service of the Russian Federation, Aleksandr Bortnikov; the Direct Deputy Chief of Staff of the Presidential Office, Sergei Kiriyenko and his son, Vladimir Kiriyenko; and Promsvyazbank CEO Petr Fradkov.
Nord Stream 2
On February 23, 2022, OFAC added Nord Stream 2 AG, the project company constructing the Nord Stream 2 pipeline and an indirect Gazprom subsidiary, and Matthias Warnig, Nord Stream AG’s CEO, to the SDN list. Previously, President Biden had waived sanctions prescribed by U.S. legislation on both Nord Stream 2 AG and Warnig. OFAC also issued a general license authorizing transactions ordinarily incident to the wind-down of activities involving Nord Stream AG and its blocked subsidiaries until March 2, 2022, at 12:01am Eastern Standard Time.
Global Coordination Continues
On February 22, 2022, Japan, Canada and Australia announced additional measures against Russia. These come on the heels of sanctions already issued by the United Kingdom and announced by the European Union on February 21 and 22, 2022.
The Japanese government announced sanctions that, when implemented, will include an asset freeze, travel restrictions, and an import/export ban on Russian officials associated with the areas. The Japanese government will also impose sanctions on the issuance and circulation of “sovereign bonds,” such as Russian government bonds and government agency bonds. The Japanese government further announced that it is considering proposals for future sanctions to: (1) restrict exports of semiconductors and other advanced technologies, (2) suspend transactions with several major Russian banks, and (3) freeze assets and implement travel restrictions for key government officials.
The Canadian government also has announced that all Canadians would be banned from taking part in “financial dealings with the so-called independents states of Luhansk and Donetsk.” Canadians will also be banned from purchasing Russian sovereign debt. Finally, Canada will issue individual sanctions against members of Russia’s parliament who voted to recognize Luhansk and Donetsk, as well as two state-backed Russian banks.
Finally, the Australian government has announced that it will impose travel bans and targeted financial sanctions on eight unspecified members of the Russian Federation’s security council. It will also amend its existing sanctions regulations to cover the breakaway regions of Donetsk and Luhansk, prohibiting trade in sectors including transport, energy, telecommunications, oil, gas and mineral reserves. Further, Australian individuals and entities will be banned from doing business with Rossiya Bank, Promsvyazbank, IS Bank, GenBank and the Black Sea Bank for Development and Reconstruction. These measures come in addition to existing sanctions on VEB.
Further sanctions are expected from these jurisdictions, as well as from other allies, in the coming days. For example, the British Foreign Secretary noted on February 22, 2022, that if Russia continues to escalate violence in the region, the UK will move forward with the blocking of Russian sovereign debt.
February 24: U.S. Government Intensifies Sanctions and Export Controls Against Russia
On February 24, 2022, the U.S. Government issued a number of sanctions measures in response to Russia’s attack on Ukraine. These measures include sweeping financial sanctions and stringent export controls, which will have broad impacts on companies and individuals doing business in Russia, Ukraine and Belarus. Today’s announcement came alongside additional measures coordinated with U.S. allies, including the United Kingdom, European Union, Canada and Japan.
A brief overview of today’s U.S. measures is provided below. In following blogs, we will provide more focused looks at (a) U.S. sanctions; and (b) sanctions and export controls issued by other key economies around the world.
The USDT, Office of Foreign Assets Control (OFAC) imposed the following sanctions targeting the Russian financial system and the ability of several large banks, military companies and energy sector participants to access finance:
- SDN Designations: OFAC added a number of additional financial institutions, individuals and entities to the SDN List. Accordingly, all transactions with and services for these parties are prohibited, and the property and interests in property of such persons that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Designated parties include the following:
- Financial Institutions: Russia’s second largest financial institution, VTB Bank (VTB), and its 20 subsidiaries, as well as Bank Otkritie, Sovcombank OJSC, and Novikombank and their collective 34 subsidiaries.
- Individuals: The following Russian elites, family members and related companies: Sergei Ivanov (and his son, Sergei), Nikolai Patrushev (and his son Andrey), Igor Sechin (and his son Ivan), Andrey Puchkov, Yuriy Solviev (and two real estate companies he owns), Galina Ulyutina and Alexander Vedyakhin.
- Belarusian Individuals and Entities: 24 Belarusian individuals and entities, including two significant Belarusian state-owned banks, nine defense firms, and seven regime-connected official and elites.
- New Directive 2 to Executive Order 14024: OFAC issued a new directive to prohibit correspondent and payable-through account services and the processing of transactions for Russia’s largest financial institution, Sberbank, and its 25 subsidiaries, to become effective as of March 26, 2022. Sberbank is the largest bank in Russia and holds one-third of Russia’s financial assets. Sberbank has not been added to OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List). As a result of Directive 2, U.S. financial institutions must close any Sberbank correspondent or payable-through accounts and must reject any future transactions involving Sberbank or its foreign financial institution subsidiaries, unless exempt or authorized by OFAC.
- New Directive 3 to Executive Order 14024: Similar to Directive 1 under Executive Order 13662, New Directive 3 prohibits all transactions in, provision of financing for, and other dealings in new debt of greater than 14 days maturity and new equity issued by the following thirteen Russian state-owned enterprises and entities: Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways. The restriction applies to debt or equity issued on or after March 26, 2022.
Export Control Restrictions
The U.S. Department of Commerce, Bureau of Industry and Security (BIS) imposed the following export control restrictions:
- Broad Expansion of Licensing Requirements for Exports, Reexports and Transfers to Russia: The rule expands licensing requirements for the export, reexport or transfer (in-country) to or within Russia of any item subject to the EAR and specified in Export Control Classification Numbers (ECCNs) in Categories 3, 4, 5, 6, 7, 8, or 9 of the CCL, excluding deemed exports and deemed reexports. This includes certain microelectronics, computers, telecommunications items, products and software with encryption functionality, sensors, navigation equipment, avionics, marine equipment and aircraft components that were not previously subject licensing requirements for Russia.
- Restrictions on the Use of License Exceptions: Previously available license exceptions are restricted for Russia, and only certain limited sections of the following license exceptions are now available:
- TMP: for items for use by the news media;
- GOV: for certain government activities;
- TSU: for software updates to civil end users that are subsidiaries of, or joint ventures with, companies headquartered in the United States or partner countries;
- BAG: for baggage, excluding firearms and ammunition;
- AVS: for aircraft flying into and out of Russia;
- ENC: for encryption items, but not if they are destined for Russian “government end users” and Russian state-owned enterprises; and
- CCD: for consumer communication devices, but not if they are destined for “government end users” or certain individuals associated with the government.
- Two New Foreign Direct Product Rules: one for all of Russia (the Russia FDP Rule) and one for Russian “military end users” (the Russia-MEU FDP Rule):
- The Russia FDP Rule expands the scope of the direct product rule to cover foreign-made items that are the direct product of U.S. software or technology, or of items produced by a complete plant or “major component” of a plant that itself is the “direct product” of such U.S.-origin technology or software, that is subject to the Export Administration Regulations (EAR) and described in Categories 3-9 of the Commerce Control List (CCL). The Russia FDP Rule applies when there is knowledge that the foreign-produced item is destined to Russia or will be incorporated into or used in the production or development of any part, component, or equipment produced in or destined to Russia. The Russia FDP rule does not apply to foreign-produced items that would be designated as EAR99.
- The Russia-MEU FDP Rule is more extensive than the Russia FDP Rule. The Russia-MEU FDP Rule expands the scope of the direct product rule to cover foreign-made items that are the direct product of any U.S. software or technology subject to the EAR that is on the CCL, or of items produced by a complete plant or “major component” of a plant that itself is the “direct product” of such U.S. origin technology or software. Such items will require a license if an entity with a Footnote 3 designation on the Entity List is a party to the transaction, or if there is knowledge that the item will be incorporated into or used in the production or development of any part, component, or equipment produced, purchased, or ordered by any entity with a Footnote 3 designation on the Entity List. These restrictions apply to all items, including those designated EAR99, with certain exceptions, and impose a license requirement for Footnote 3-designated Russian military end users.
- Footnote 3 Designation: 47 Russian entities have been transferred from the MEU List to the Entity List and are designated with a Footnote 3 notation. Parties with a Footnote 3 designation are subject to the Russia-MEU FDP Rule. Accordingly, a license is required to export, reexport, or transfer (in-country) all items subject to the EAR (including foreign-produced items under the Russia-MEU FDP rule) to these entities, with limited exceptions. Footnote 3 also applies to the Russian Ministry of Defence, including the Armed Forces of Russia, wherever located. BIS also added two new Russian MEUs to the Entity List with a Footnote 3 designation. Additional entities may be added in the future.
- Partner Country Exclusion: The Russia FDP Rule and the Russia-MEU FDP Rule license requirements do not apply to exports or reexports from partner countries who have committed to implementing substantially similar export controls on Russia under their own domestic laws. The following partner countries are excluded from both FDP Rules: currently Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.
Expands Russia “Military End Use” and “Military End User” Controls to Apply to All Items Subject to the EAR: The rule expands the scope of the “military end use” and “military end user” controls under § 744.21 of the EAR to apply to all items subject to the EAR instead of the narrower subset of items identified in supplement no. 2 to Part 744. There are exceptions for food and medicine classified as EAR99 and mass market encryption commodities and software (5A992/5D992) that are not for a Russian government end user or state-owned enterprise.
Review Policy of Denial to Most License Applications for Russia: Applications for the export, reexport, or transfer (in-country) of items that require a license for Russia will be reviewed, with limited exceptions, under a policy of denial. Certain applications related to safety of flight, maritime safety, humanitarian needs, government space cooperation, civil telecommunications infrastructure, government-to-government activities, and to support limited operations of partner country companies in Russia will be reviewed on a case-by-case basis.
UK, EU, Japanese and other authorities are expected to issue additional detail on sanctions, export controls and implementation on February 25, 2022.
February 24: Expanded U.S. Sanctions Targeting Russia’s Financial Sector
On February 24, 2022, in response to Russia’s attack on Ukraine, President Biden announced further sanctions on Russian individuals and entities. These measures are in addition to those already announced on February 22 and 23 and are primarily targeted at Russia’s financial sector.
These sanctions are part of a global, coordinated effort to maximize consequences for Russia’s actions and show solidarity for Ukraine’s sovereignty. Global partners, including the UK, EU, Canada, Australia and Japan, have also issued sanctions.
Measures were taken both by OFAC and BIS. The information below contains a summary of recent OFAC sanctions action. We published a separate alert detailing recent amendments to the U.S. Export Administration Regulations (EAR).
Additions to OFAC’s Specially Designated Nationals (SDN) List
OFAC has imposed full blocking sanctions on the following Russian financial institutions:
VTB Bank Public Joint Stock Company (VTB Bank);
Public Joint Stock Company Bank Financial Corporation Otkritie (Otkritie);
Open Joint Stock Company Sovcombank (Sovcombank); and
Joint Stock Commercial Bank Novikombank (Novikombank).
OFAC also added several subsidiaries of the aforementioned companies to the SDN List. Regardless of whether individually designated, pursuant to OFAC’s “50% Rule,” any entity owned at least 50 percent by one or more SDNs is also considered a blocked party.
Additionally, OFAC designated a number of Russian elites in President Putin’s inner circle and within “elite positions of power” within the Russian state. Many serve within leadership positions of the companies designated above.
Finally, 24 Belarusian individuals and entities were designated as SDNs for their support of the invasion, including two significant Belarusian state-owned banks, nine defense firms, and seven regime-connected official and elites. The full list of designated Belarusian parties is available here.
As a result of designation to the SDN List, all assets of the aforementioned SDNs (and their subsidiaries) must be frozen and U.S. persons are prohibited from business dealings absent an OFAC authorization or exemption.
Other Restrictions Imposed Against Russian Financial Institutions
OFAC also issued two new directives pursuant to Executive Order (E.O.) 14032 targeting Russia’s financial sector.
OFAC issued Directive 2 under E.O. 14024, which imposes correspondent and payable-through account sanctions. These sanctions fall short of a full asset freeze, and instead, prohibits U.S. financial institutions from: (i) the opening or maintaining of a correspondent account or payable-through account for or on behalf of a designated entity; and (ii) the processing of transactions involving any such entities.
Accordingly, U.S. financial institutions must reject payments a Directive 2 entity attempts to process in U.S. dollars for its clients unless exempt or authorized by OFAC.
At this time, only Sberbank and its subsidiaries have been sanctioned pursuant to Directive 2. OFAC guidance clarifies that its “50% Rule” also applies to Directive 2.
OFAC further expanded debt and equity prohibitions against certain Russian entities by implementing a new Directive 3 under E.O. 14024. Directive 3 prohibits transactions and dealings by U.S. persons or within the United States in new debt of longer than 14 days maturity and new equity of certain designated Russian state-owned enterprises and entities that operate in Russia’s financial services sector.
The substantive restrictions of Directive 3 under E.O. 14024 mirror those of Directive 1 issued under E.O. 13662. OFAC notes that each of its directives operate independently from one another.
Initially, the following 13 entities are subject to Directive 3:
- Gazprombank Joint Stock Company;
- Joint Stock Company Russian Agricultural Bank;
- Public Joint Stock Company Gazprom;
- Public Joint Stock Company Gazprom Neft;
- Public Joint Stock Company Transneft (Transneft);
- Public Joint Stock Company Rostelecom;
- Public Joint Stock Company RusHydro;
- Public Joint Stock Company Alrosa;
- Joint Stock Company Sovcomflot;
- Open Joint Stock Company Russian Railways;
- Joint Stock Company Alfa-Bank; and
- Credit Bank of Moscow Public Joint Stock Company.
For these 13 entities, the Directive 3 restrictions apply to debt or equity issued on or after March 26, 2022.
In order to minimize unintended consequences on third parties, OFAC simultaneously issued an additional eight general licenses allowing certain transactions related to:
- international organizations and entities;
- agricultural and medical commodities and the COVID-19 pandemic;
- overflight and emergency landings;
- dealings in certain debt or equity;
- derivative contracts;
- the wind-down of transactions involving certain blocked persons; and
- the rejection of transactions involving certain blocked persons.
In particular, per General License 8, certain transactions “related to energy” are authorized through June 24, 2022. The term “related to energy” means the extraction, production, refinement, liquefaction, gasification, regasification, conversion, enrichment, fabrication, transport, or purchase of petroleum, including crude oil, lease condensates, unfinished oils, natural gas liquids, petroleum products, natural gas, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels, or uranium in any form, as well as the development, production, generation, transmission, or exchange of power, through any means, including nuclear, thermal, and renewable energy sources.
However, the ability to make payments under GL8 must be carefully examined and in many cases will need to be made through third-country intermediary banks. Care must also be taken to assess whether these third countries have adopted similar sanctions restrictions that would impact payments in or through those countries.
General License 11 authorizes a wind-down period through March 26, 2022, at 12:01 am Eastern Time for transactions involving VTB Bank, Otkritie, and Sovcombank. There is no authorized wind-down period for Novikombank. OFAC guidance also states the GL11 authorizes only new or continued business activities that are ordinarily incident and necessary to wind-down activities. Wind-down activities do not include the continued processing of funds transfers, securities trades, or other transactions involving a blocked person that were part of ongoing business activities prior to the imposition of sanctions, unless separately authorized.
We continue to monitor for additional U.S. sanctions developments as the situation unfolds.
February 25: Further Measures Imposed by the EU and United Kingdom
The EU and UK have imposed further sanctions in response to the invasion of Ukraine and the recognition by Russia of the DNR and LNR of Ukraine as independent territories.
European Union (EU) Response
The latest round of designations includes three Russian commercial banks: Bank Rossiya, Promsvyazbank, and VEB, as well as key individuals in the Russian regime and allies of Mr. Putin. Individuals and entities currently subject to an asset freeze (and travel ban in the case of individuals) can be identified by searching the EU’s Sanctions Map.
In addition to the asset freezes and travel bans, the EU has also imposed wide-ranging additional sanctions, namely:
An import ban on all goods from the DNR and LNR into the EU, coupled with a prohibition on the direct or indirect financing of such imports. An exemption has been included for goods originating in these regions which have been made available to the Ukrainian authorities for examination and for which a certificate of origin has been issued in accordance with the EU-Ukraine Association Agreement;
Restrictions on trade and investment, including prohibitions on the acquisition (or extension of ownership) of real estate and legal entities. It is also prohibited to participate in loans, financing arrangements or joint ventures in the DNR and LNR;
A prohibition on the supply of services related to tourism in the DNR and LNR;
An export ban on goods and technologies listed in Annex II to Regulation (EU) 2022/263 to the DNR and LNR. The list includes raw materials, vehicles, aircrafts, gold and various other goods and equipment;
A ban on technical assistance, brokering, construction or engineering services relating to the transport, telecommunications, energy, oil, gas and mineral resources sectors in the DNR or LNR; and
A prohibition on directly or indirectly dealing with transferable securities and money-market instruments issued after March 9, 2022, by the Russian government, the Central Bank of Russia, or a legal person acting on behalf of the aforementioned entities. It is further prohibited to make (or be part of any arrangements to make) any new loans or credit to Russia, its government, and the Central Bank (except in relation to loans or credit for the financing of unrestricted imports and exports of goods and (non-financial) services between the EU and other countries).
The above restrictions are in some cases subject to wind-down provisions that allow for obligations that arose under contracts concluded before February 23, 2022. Where a wind-down provision is relied on, a long stop date may apply depending on the particular activity. In many cases, where a wind-down provision is relied on, this requires notification to the relevant competent authority in the EU.
Similar measures have been announced in the UK, although many are yet to be formally implemented.
Eleven further individuals and entities were designated under the UK’s Russian sanctions on February 24, 2022, bringing the current total of persons subject to invasion-response sanctions in the UK up to 19, with many more expected to follow.
Those currently subject to sanctions in the UK can be found by searching the consolidated list.
Multiple Russian banks have been designated by the UK, including VTB Bank, Rossiya Bank, IS Bank, GenBank, Promsvyazbank, and the Black Sea Bank. Designated companies include those involved with the production of military equipment, as well as United Aircraft Corporation and United Shipbuilding Corporation.
In addition to the measures being introduced by legislation, Aeroflot, Russia’s national airline, is currently prohibited from flying in UK airspace. Russia has retaliated to the Aeroflot ban in kind, by prohibiting British airlines from landing at Russia’s airports or crossing its airspace.
Dual-use licenses to Russia issued by the UK Export Control Joint Unit have been suspended with immediate effect.
Further measures are expected early next week. In particular:
- Asset freezes against further key Russian entities and individuals;
- Restricting Russian access to UK debt and capital markets;
- A restriction on the clearing of payments through the UK;
- Limiting Russian nationals from holding more than £50,000 in UK bank accounts;
- A prohibition on a range of exports, including those that generate wealth for much of Russia’s elite. This will include high-end and hi-tech exports, as well as critical equipment and components in the extractive, electronics, telecommunications and aerospace sectors; and
- An extension of the sanctions levied against Belarus due to its decision to cooperate with Russia, with respect to the invasion of Ukraine.
Wind-down provisions are also expected in the UK sanctions to assist companies with respect to existing obligations. Pillsbury will share additional insights and information once the final text of the legislative act is published.