On June 23, 2014, the European Union adopted Council Regulation No. 692/2014, which implements Council Decision 2014/386/CFSP, banning most imports of goods from Crimea and the city of Sevastopol. The EU measure followed the June 20, 2014 designation of seven individuals by the US Treasury Department, Office of Foreign Assets Control (OFAC) as Specially Designated Nationals (SDNs) under Executive Order 13660.
The European Union and the United States have imposed a range of sanctions in response to Russia’s annexation of Crimea and efforts to destabilize Ukraine.
The EU measures have included:
- Council Regulation 208/2014 implementing Council Decision 2014/119/CFSP: These sanctions, which entered into force on March 6, 2014, target former Ukrainian President Viktor Yanukovych and his close circle of allies identified by the EU as responsible for the misappropriation of Ukrainian state funds and for human rights violations in Ukraine.
- Council Regulation 269/2014 implementing Council Decision 2014/145/CFSP: As we have previously advised, these sanctions, which entered into force on March 18, 2014, target persons identified as involved in threatening the territorial integrity of Ukraine.
US sanctions imposed in response to the Ukraine situation have included:
- Executive Order 13660: As we have previously advised, this executive order, issued March 6, 2014, provided for the blocking of persons involved in certain Ukraine-related activity, including threatening the territorial integrity of Ukraine, undermining of democratic processes, and misappropriation of state assets.
- Executive Order 13661: As we have previously advised, this executive order, issued March 17, 2014, targeted Russian government officials and persons involved in the Russian arms sector.
- Executive Order 13622: As we have previously advised, this executive order, issued March 20, 2014, authorized the Treasury Department to impose sanctions against persons in any sector of the Russian economy as it deems appropriate, including the financial services, energy, metals and mining, engineering, and defense sectors.
The European Union and the United States have made extensive designations under the foregoing authorities, which we have previously summarized in part. One key exception to this is Executive Order 13622, under which OFAC has not made any designations to date.
OFAC formally has implemented Executive Orders 13660, 13661, and 13662 through promulgation of the Ukraine-Related Sanctions Regulations, 31 C.F.R. Part 589, as we have previously advised. Furthermore, the US Department of Commerce and US Department of State have imposed certain Russia-related export restrictions, on which we have previously advised.
EU Import Ban on Crimean- and Sevastopol-Origin Goods
Council Regulation No. 692/2014 (the EU Regulation) prohibits the import into the European Union of goods originating in Crimea or the Crimean city of Sevastopol. The EU Regulation further prohibits the provision of financing, financial assistance, insurance, and reinsurance related to such imports, and actions to circumvent the foregoing prohibitions. It is not clear why the EU Regulation distinguishes between Crimea and Sevastopol, a city in Crimea where Russia maintains a naval station.
The EU regulation defines “goods originating in Crimea or Sevastopol” as “goods which are wholly obtained in Crimea or in Sevastopol or which have undergone their last substantial transformation there.”
The EU Regulation applies: (i) within the EU territory, (ii) to entities incorporated or constituted under the law of an EU Member State (including their foreign branches), (iii) to any legal entity (including non-EU companies) in respect of any business done in whole or in part within the EU, (iv) to nationals of the EU Member States wherever located, and (v) on board aircraft or any vessel under the jurisdiction of a EU Member State.
The EU Regulation does not apply to:
- Trade contracts concluded before June 25, 2014. Performance of contracts concluded before June 25, 2014 will be permitted, provided that performance takes place by September 26, 2014. Performance of “ancillary” contracts related to such activity is also permitted. Persons seeking to perform under such contracts must notify the competent authority of the Member State in which they are established at least ten working days prior to such performance.
- Ukrainian-origin goods. The Regulation does not apply to goods originating in Crimea or Sevastopol which have been made available for examination to, and have been controlled by, the Ukrainian authorities and which have been granted a certificate of origin by the Government of Ukraine.
On June 20, 2014, OFAC designated seven individuals as SDNs under authority of Executive Order 13660. As noted above, this executive order targets persons involved in threatening the territorial integrity of Ukraine, undermining of democratic processes, and misappropriation of state assets. Persons designated under Executive Order 13660 carry the [UKRAINE] tag on OFAC’s SDN List.
The property and interests in property of the sanctioned persons are “blocked,” which means that their assets located in the United States or in the possession or control of US persons are frozen. This effectively cuts off the sanctioned persons from the US financial and commercial system, and prohibits US persons from conducting business with the sanctioned persons anywhere in the world. Furthermore, pursuant to Section 589.406 of the Ukraine-Related Sanctions Regulations, any entity in which a sanctioned person owns a 50 percent or greater interest is blocked, even if OFAC has not publicly designated the entity as an SDN.
The list of seven sanctioned individuals is as follows:
- Valery Bolotov
- Igor Vsevolodovich Girkin
- Valery Vladimirovich Kaurov
- Sergei Ivanovich Menyailo
- Vyacheslav Ponomaryov
- Andrey Yevgenyevich Purgin
- Denis Pushilin
Through their recent actions, the European Union and the United States have demonstrated a continuing willingness to impose sanctions in response to Russia’s annexation of Crimea and destabilization of Ukraine. Negotiations between the Governments of Ukraine and Russia are ongoing, but overall the situation remains fluid and difficult to predict. Both the European Union and the United States have indicated that they would consider imposing further sanctions if tensions in Ukraine escalate.