With the continuing situation in Ukraine, the EU has issued a series of announcements over the last week, culminating in the publication of amendments to EU Regulation 833/2014 ("Regulation"), which take effect today.

On 8 September 2014, the EU indicated it would target key sectors of the Russian economy, with a subsequent press release on 11 September 2014 by the President of the European Council, Herman van Rompuy, stating that the Permanent Representative Committee will conduct a comprehensive review of the implementation of the peace plan by the end of September and that the European Council has "always stressed the reversibility and scalability of [its] restrictive measures."

As anticipated, the EU has extended sanctions targeting Russia's access to EU capital markets, certain oil exploration and production activities, the export of dual-use goods, and Russia's defence sector. Three additional lists of entities targeted under the sectoral sanctions have also been added. Key changes are highlighted below.

Restrictions on Russia's access to capital markets have been strengthened by the introduction of a new article that prohibits the purchase, sale, provision of investment services or assistance in the issuance of, or otherwise dealing with transferable securities or money-market instruments with a maturity exceeding 30 days issued after 12 September 2014 by:

  1. Russian defence related companies listed in the new Annex V (OPK Oboronprom, United Aircraft Corporation, and Uralvagonzavod);
  2. Russian companies publically controlled or with over 50% public ownership, with estimated total assets of over 1 trillion Roubles and deriving at least 50% of their revenues from the sale and transportation of crude oil or petroleum products, as listed in the new Annex VI (Rosneft, Transeft and Gazprom Neft);
  3. any entity established outside the EU which is more than 50% owned directly or indirectly by those referred to in (a) or (b); or
  4. anyone acting on behalf or at the direction of any of these entities.

The maturity period for transferable securities and money-market instruments under the earlier provisions targeting Russian state-owned banks (such as Sberbank and Gazprombank) has also been reduced to 30 days (from the previous 90). Additionally, a further new provision prohibits directly or indirectly making or being a part of any arrangement to make new loans or credit with a maturity exceeding 30 days to any of those falling within the articles mentioned, although this is subject to limited exceptions.

In relation to the oil sector, the primary change is the introduction of a new prohibition on the provision by EU nationals and companies of "associated services necessary for deep water oil exploration and production, Artic oil exploration and production, or shale oil projects in Russia". These associated services are defined in a new article in the Regulation as drilling, well testing, logging and completion services, and the supply of specialised floating vessels. The prohibition does not affect contracts or framework agreements entered into before 12 September 2014 or ancillary contracts necessary for their execution, or services necessary for urgent prevention or mitigation of an event likely to have significant health, safety or environment consequences.

On the defence industry front, the Regulation has been amended to include a new article that prohibits the sale, supply, transfer or export of dual-use goods and technology to those entities listed in the new Annex IV (nine entities are listed, including JSC Kalashnikov). In relation to these dual-use goods, the Regulation now also includes a prohibition on providing technical assistance, brokering services and other services, or financing or financial assistance directly or indirectly to those entities listed in Annex IV. However, there is an exception for contracts or agreements entered before 12 September 2014. There are also specific carve-outs in relation to the aeronautics and space industry, as well as for maintenance and safety of existing civil nuclear capabilities within the EU.

Notably, the prohibition under Article 4(1)(b) of the Regulation on the provision of financing or financial assistance in relation to the sale, supply, transfer or export of goods and technology listed on the Common Military List, including grants, loans and export credit insurance or guarantees, has been expanded to include a specific prohibition on providing insurance or reinsurance in relation to these activities. This expansion comes subsequent to the issuing of specific guidance from the Export Control Organisation, which in an FAQ document circulated on 14 August 2014 confirmed that for the purposes of the Regulation, financial assistance did not include insurance or reinsurance for the transport of prohibited and restricted goods.

Importantly, financial services other than those specified in the expanded Article 5 of the Regulation, such as deposit and insurance services from those institutions subject to the sectoral sanctions, remain unaffected, as do derivatives used for hedging purposes in the energy market.

In addition to the amendments to the Regulation, the EU also expanded the list of designated persons and entities under EU Regulation 269/2014, which targets those responsible for actions which undermine Ukraine's territorial integrity. An additional 24 individuals were added to the list, bringing the total number of individuals subject to asset freezes to 119 individuals and 23 entities.

Sanctions in place against Russia remain subject to change, depending on the evolving situation on the ground in Ukraine. No-go areas for the EU also remain, including a hands-off approach to Russia's gas sector. What happens next will depend on the results of the Permanent Representative Committee's review of the implementation of the peace plan in Ukraine.