EU Introduces Sectoral Sanctions
Having discussed the possibility for some months, the EU has now adopted a package of targeted, sector-wide sanctions under Council Decision 2014/512/CFSP and Council Regulation (EU) No. 833/2014. The EU regime is substantially similar to the US regime, including its recently issued Sectoral Sanctions Identifications List. The regimes do not overlap precisely, and there are differences, for example, in the banks that have been sanctioned by the EU and US. Please see our Client Updates of 16 July and 29 July for further information.
In respect of the banking sector, the EU has prohibited the purchasing, selling, providing brokering services or assistance in the issuance of, or otherwise dealing with, “transferable securities and money-market instruments with a maturity exceeding 90 days”, issued after 1 August by the following state-owned banks: Sberbank, VTB Bank, Gazprombank, Vnesheconombank (“VEB”), and Rosselkhozbank (aka Russian Agricultural Bank). The prohibition extends to dealing with transferable securities and money-market instruments of the banks’ non-EU subsidiaries – defined as more than 50% held – or those of any other person acting at the direction of the listed banks or their subsidiaries. VTB Bank, Rosselkhozbank and VEB have already been designated by the US.
In respect of the energy sector, the EU has placed certain goods and technology related to the energy industry within its export licence regime. The supply, sale, transfer or export of a set of key technologies designated in Annex II to Council Regulation (EU) No. 833/2014, will, if intended for use in Russia, require licensing from the competent authority of the relevant EU Member State. In line with new US restrictions adopted on 29 July, no licences will be granted in respect of deep water, Arctic oil exploration and production and shale oil projects in Russia, except for obligations arising under contracts entered into before 1 August 2014. The provision of technical assistance, brokering services, financing or financial assistance, including grants, loans and export credit insurance, in respect of these goods will also require licensing. The measures do not restrict the actual trade of oil, gas or other commodities.
In respect of the defence sector, the EU has prohibited the sale, supply, transfer or export to Russia of arms and related material, and of dual-use goods and technology for military use in Russia, or to Russian military end-users. These prohibitions apply respectively to all items listed on the common military list of the EU, including weapons and ammunition, military vehicles and paramilitary equipment, and all items on the EU’s dual-use list (the latest list of which is found in Council Regulation (EC) No. 428/2009). The provision of technical assistance, brokering services, financing or financial assistance, including grants, loans and export credit insurance, in respect of these goods, has also been prohibited. Contracts concluded before 1 August may still be performed; in certain circumstances, performance of such contracts may require authorisation.
For more information on these sector-wide sanctions, please see our Client Update of 31 July.
EU Expands List of Designated Individuals and Entities
The EU has added 15 individuals and 18 entities to its list of persons subject to an asset freeze on the grounds that they are involved in undermining or threatening the territorial integrity, sovereignty and independence of Ukraine. The 15 individuals are Mikhail Efimovich Fradkov (director of the Foreign Intelligence Service), Nikolai Platonovich Patrushev, Aleksandr Vasilievich Bortnikov (director of the Federal Security Service), Rashid Gumarovich Nurgaliev, Boris Vyacheslavovich Gryzlov, Sergei Orestovoch Beseda, Mikhail Vladimirovich Degtyarev, Ramzan Akhmadovitch Kadyrov, Alexander Nikolayevich Tkachyov, Pavel Gubarev, Ekaterina Gubareva, Fedor Berezin, Valery Vladimirovich Kaurov, Serhii Anatoliyovych Zdriliuk and Vladimir Antyufeyev. The 18 entities are the ‘Lugansk People's Republic’, the ‘Donetsk People's Republic’, the ‘Federal State of Novorossiya’, the International Union of Public Associations ‘Great Don Army’, ‘Sobol’, the ‘Lugansk Guard’, the ‘Army of the Southeast’, the ‘Donbass People's Militia’, ‘Vostok battalion’, Kerch Ferry, Sevastopol Commercial Seaport, Kerch Commercial Seaport, Universal-Avia, Nizhnyaya Oreanda, Azov, Massandra, Magarach and Novy Svet.
The EU has also widened its designation criteria to allow it to impose asset freezes on persons and entities that actively support or are benefitting from Russian decision makers deemed to be responsible for the annexation of Crimea or the destabilisation of Eastern Ukraine. Eight individuals and three entities have been added under the new criteria. The individuals are Alexey Alexeyevich Gromov, Oksana Tchigrina, Boris Litvinov, Sergey Abisov, Arkady Romanovich Rotenberg, Konstantin Valerevich Malofeev, Yuriy Valentinovich Kovalchuk and Nikolay Terentievich Shamalov. The three entities are Joint-Stock Company Concern Almaz-Antey (a manufacturer of anti-aircraft weaponry), Dobrolet (a subsidiary of Aeroflot) and Russian National Commercial Bank.
EU Expands Restrictions on Trade and Investment in Crimea and Sevastopol
The EU has imposed additional sanctions on trade and investment in Crimea and Sevastopol, with effect from 30 July. The restrictions comprise a ban on the sale, supply or transfer of key equipment and technology destined for the creation, acquisition or development of infrastructure projects in the following three sectors: transport, telecommunications and energy. The restrictions also prohibit the sale, supply or transfer of key equipment and technology for the exploitation of oil, gas and mineral resources in Crimea and Sevastopol. In connection with these bans on trade and investment, the EU has prohibited the provision of technical assistance, training and financing to enterprises engaged in the creation, acquisition or development of infrastructure in the sanctioned sectors, or in the exploitation of the sanctioned natural resources.