In response to the continuing situation in eastern Ukraine and Crimea, the European Union (EU) has adopted further significant sanctions against Russia. On 6 August 2014, Russia responded.

The EU is continuing to intensify sanctions against Russia in response to the rising tensions in eastern Ukraine and Crimea. A number of key restrictive measures came into force on 1 August 2014, contained in Council Regulation (EU) No 833/2014 of 31 July 2014 (“Council Regulation”).

Financial Sanctions

New sectoral sanctions prohibit EU nationals and companies entering into contracts after 1 August 2014 to buy or sell a range of specified financial instruments (with a maturity exceeding 90 days) issued by the following major state owned Russian banks – Bank for Development and Foreign Economic Affairs  (“VEB”), Gazprombank, Russian Agricultural Bank (Rosselkhozbank), Sberbank and VTB Bank OAO. This prohibition extends to their non-EU subsidiaries owned over 50 percent and those acting on their behalf. Services related to the issuing of such financial instruments, e.g. brokering, also are prohibited.

Other Restrictions

Further sanctions measures adopted by the EU include:

  1. an arms embargo (which includes a ban on the purchase, import or transport of military goods from Russia);
  2. an export ban on dual-use goods for military end users; and
  3. measures to curtail access to certain equipment and technologies, particularly in the oil exploration and production sector.

These measures have followed other recent sanctions aimed at Russia. In particular, EU Regulation 825/2014 on 30 July 2014 already had placed a ban on providing loans or other credit in a wide range of sectors in Crimea and Sevastopol.

To date, the EU also has frozen the assets of, and banned travel for, many individuals, including certain Russian and Ukrainian officials, who are deemed responsible for destabilizing the situation in eastern Ukraine. The EU also has frozen the assets of a number of entities in Russia and the Ukraine, making it an offence to deal in assets belonging to listed entities.

Russia Retaliates

In response, on 6 August 2014, Russia imposed a one-year import ban on certain agricultural and food products originating from countries that have introduced sanctions against Russia (or acceded to such sanctions). Furthermore, the Russian government is considering banning transit flights across its territory for EU and US airlines.

This past week’s activities represent the first significant expansion of EU sanctions beyond a limited asset freeze list. Companies should actively assess whether they face exposure in Europe or otherwise in their business interests in Russia and/or the Ukraine.