There has been further escalation of EU and U.S. sanctions resulting from the events in Ukraine, including new designations and the issuance of a new Executive Order on 20 March 2014 (New EO) that provides additional legal basis for future designations and a new EU Regulation that adds 12 persons to the list of natural and legal persons, entities and bodies subject to the EU sanctions.
The Russian government has responded to the initial sanctions so far by imposing a travel ban on certain U.S. government officials, but additional retaliatory measures in response to the New EO are being considered. Companies with operations in Russia should remain vigilant and assess whether new designations impact their current activities and how the expanded authority for future designations may impact their operations, based on sectors/industries that could be targeted by the U.S. government pursuant to the authority set forth in the New EO.
On 20 March 2014, the U.S. government designated additional Russian individuals as well as one Russian bank under Executive Order 13661 from 17 March 2014 (which was described in our prior alert). U.S. persons are prohibited from engaging in transactions with designated persons and entities, including any entities that are owned (at 50% or higher interest) or otherwise controlled by designated persons. Bank Rossiya is the first legal entity in Russia that has been designated under these sanctions issued to address the situation in Ukraine. The names of the individuals and their roles, as well as some additional information regarding the reasons for designation, are set forth in the U.S. Treasury’s press release and the attached statement from President Obama. Considering that not all of the new designated individuals are government officials, and the list includes persons with interests in a variety of companies, the sanctions now have a somewhat wider reach but they remain focused on designated persons and entities (and extend to entities owned/controlled by designated persons). The sanctions still do not restrict trade with the entire country nor do they target the Russian government or any government agency in particular.
In addition, Obama issued the New EO on 20 March 2014 that provides a new legal basis for future designations. Under this New EO, the U.S. government could designate anyone who operates in the following sectors in Russia: “financial services, energy, metals and mining, engineering, and defense and related material.” The U.S. government has not yet exercised authority under this new EO, but can use it for future designations of companies in Russia in one or more of these sectors, depending on further developments. At present, there is no broad ban on dealings with Russian companies in these sectors/industries, but companies should monitor further developments as the situation remains fluid and the U.S. government may start designating companies in those sectors, expanding the list of entities targeted by these new sanctions.
On 21 March 2014, the Council of the European Union (Council) adopted Council Implementing Regulation 284/2014, which adds 12 individuals to the list of persons subject to visa ban and asset freeze under the EU sanctions against Russia. The EU now has 33 individuals subject to visa ban and asset freeze. These new sanctions enter into effect on 21 March. The new persons subject to the EU sanctions are politicians, including members of Duma that called publicly for the annexation of Crimea, key figures of the government supporting the deployment of Russian forces in Ukraine, and certain military commanders that occupied Ukrainian sovereign territory:
- Rogozin, Dmitry Olegovich, Deputy Prime Minister of the Russian Federation
- Glazyev, Sergey, Adviser to the President of the Russian Federation
- Matviyenko, Valentina Ivanova, Speaker of the Federation Council
- Naryshkin, Sergei Evgenevich, Speaker of the State Duma
- Kiselyov, Dmitry Konstantinovich, Appointed by Presidential Decree on 9 December 2013 as Head of the Russian Federal State news agency Rossiya Segodnya
- Nosatov, Alexander Mihailovich, Deputy-Commander of the Black Sea Fleet
- Kulikov, Valery Vladimirovich, Deputy-Commander of the Black Sea Fleet
- Surkov, Vladislav Yurievich, Aide to the President of the Russian Federation
- Malyshev, Mikhail, Chair of Crimea Electoral Commission
- Medvedev, Valery, Chair of Sevastopol Electoral Commission
- Turchenyuk, Igor, Lt. Gen., Commander of the Russian Forces in Crimea
- Mizulina, Elena Borisovna, Deputy in the State Duma
Furthermore, the Council has asked the European Commission and the member states to prepare possible targeted measures, which will be implemented if Russia takes any further step to destabilize the situation in Ukraine.
The European Union has signed on 21 March the political provisions of its Association Agreement with Ukraine. The Council expects that the proposal for temporarily removing customs duties, so-called autonomous trade measures, on Ukrainian exports to the European Union will be swiftly adopted.
The expanded number of designations, including a designation of a bank in Russia, heightens the need by companies with operations or dealings in Russia to ensure that transactions do not involve designated persons/entities.