1. Introduction

Russian Federation President Vladimir Putin announced on 21 February 2022 that Russia recognises the independence of the self-proclaimed republican Donbas region of Ukraine.

Immediately thereafter, on 21 and 22 February 2022, the United States, the United Kingdom, Australia, Canada, Japan, and the European Union began imposing sanctions on the Donbas region and the Russian financial sector.

Russia then invaded Ukraine on 24 February 2022, which resulted in further sanctions against Russia and the extension of sanctions to Belarus for its role in aiding the Russian invasion.

On 26 February 2022, the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the United States issued a Joint Statement on Further Restrictive Economic Measures against Russia, condemning “Putin’s war of choice”. In the joint statement, these jurisdictions committed to:

  1. ensure Russian banks be removed from the SWIFT messaging system to disconnect them from the international financial system and harm their global operations;
  2. impose restrictive measures to prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of their sanctions;
  3. take measures to limit the sale of citizenships to wealthy Russians connected to the Russian government;
  4. launch a transatlantic task force to ensure the effective implementation of financial sanctions by identifying and freezing the assets of sanctioned individuals and companies that exist within their jurisdictions; and
  5. step-up coordination to prevent disinformation and other forms of “hybrid warfare”.

There has since ensued a series of measures seeking to apply progressively more pressure on Russia to de-escalate the situation and withdraw from Ukraine.[1] The new sanctions are complex, overlapping and changing rapidly. We have been monitoring them closely as they evolve. A meeting of the G7 Foreign Ministers took place on 7 April at which there was a further call for collective action, including an accelerated timetable for all G7 countries to end their dependency on Russian energy.

This alert sets out a high-level summary of the sanctions issued by the US, UK and EU and how they may impact businesses in Hong Kong. This alert is accurate as of 7 April 2022.

2. What international sanctions have been issued?

In this alert, we summarise the key financial sanctions issued by the US, UK and the EU. However, it is important to recognise that coordinated unilateral sanctions have been imposed by several jurisdictions in relation to the situation in Ukraine. In addition to those covered in this alert, Japan, Singapore, Australia, Switzerland and others have issued sanctions. The volume of sanctions from so many different governments is unprecedented and creates significant challenges for international financial institutions and businesses seeking to navigate the new legal framework.

Hong Kong does not implement unilateral sanctions. Rather, its sanctions laws are designed to implement sanctions issued by the United Nations Security Council (“UNSC”). As a permanent member of the UNSC, Russia has the right to veto UN sanctions. As it will veto any sanctions regime targeting itself, UN sanctions against Russia, and therefore Hong Kong sanctions against Russia, are highly unlikely. That does not mean there is no impact for Hong Kong and those doing business within it, as explained in the following paragraph.

3. What is the impact in Hong Kong?

The key take-away is that any dealings with Russia, involving Russian-owned entities or connected to Russia in any way now require careful scrutiny for sanctions risk given the numerous sectors, activities and transactions being targeted by international sanctions.

Key questions for consideration are set out below.


Sanctions questions


Is there a Russian nexus to my transactions, operations or business due to the counterparties involved or the export/import of goods and services?


Have the following all been screened: counterparty business name; the names of any persons or entities that own the counterparty; and any person known to control the entity?


Do any international sanctions apply due to any party being a person designated under international sanctions targeting Russia?


If any party is designated under international sanctions, do those sanctions apply to my business, this transaction or the staff involved?


Has supply chain due diligence been conducted? This should include verification-of-origin and recipient checks. It may be necessary to check paperwork such as import and export licences and bills of lading.


Are the goods or services I am exporting destined for Russia or is there a risk they may be onward exported? If so, do any prohibitions apply to the goods (including parts of the goods) or services? It’s important to understand the wide-reaching nature of sanctions to the export of, for example, US-origin goods (see further the jurisdiction of US-related export and reexport controls described in paragraph 6.)


Am I exporting goods from Russia to third parties? If so, do the import laws of the destined jurisdictions have prohibitions in place? Are there any general licences or exemptions that apply?


Does any element of my business or intended transactions involve a Russian bank? Will the transaction be hindered by the SWIFT ban or international sanctions relating to lending, correspondent banking etc (further described in remainder of this alert)?


Am I currently reliant on Russian-flagged vessels or Russian aircraft for transport of any cargo? What impact do the aviation and marine sectoral sanctions have?


Does any staff member need to recuse themselves from a project or transaction due to international sanctions applying to them personally?


If I have contractual arrangements, including financing agreements with Russian-nexus counterparts, are any sanctions clauses in the contracts engaged? Do I have a right or obligation to terminate the contract?


What are the commercial risks of continuing to do business where there is a Russian nexus? For example, non-performance of contractual obligations as well as risks arising from the general adverse economic impact on the Russian economy, including the depreciation of Russian ruble and the declining value and liquidity of Russian securities (where relevant to the transactions in question).


Will my business be impacted by the large-scale market volatility and collateral impact on global commodity prices (including oil and natural gas) as a response to international sanctions?


Will the adverse outlook on certain stock markets and foreign-exchange markets affect the performance of the portfolios/investment products managed or issued (including commodity derivatives, foreign-exchange products and related structured products)?


Is my business linked to or reliant on digital assets? Are those digital assets at risk of being abused by persons impacted by Russian sanctions to circumvent the prohibitions relating to banking and finance?


Does the removal of Russia’s “most favoured nation” status by G7 countries mean increased tariffs apply to any export activity involving Russia impacting my business?


Are there any reputational issues to be addressed? Reputational risk may arise even if sanctions do not specifically apply.


What is the follow-on impact of compliance? For example, could contract terminations lead to allegations of contract breaches?

4. Overview of international sanctions against Russia

In this section, we provide a thematic summary of certain of the type of sanctions that have been applied. This is not exhaustive and is intended to demonstrate the extent of the sanctions and the many sectors impacted. In sections 6, 7, and 8, we provide greater details on the US, EU and UK regimes, respectively.

Territory-wide embargoes

Wide-ranging prohibitions with few exceptions in relation to the direct or indirect provision of finance, goods and services to, or from, the contested regions of Crimea, Donestk and Luhansk extending to all persons and entities in those regions.

New investment in Russia by US persons is prohibited, as is US-person facilitation of new investment in Russia by a non-US person. Similarly, all new UK outward investment into Russia has been banned.


Russian political figures and oligarchs have been targeted by sanctions imposing asset freezes. The precise requirements of asset freezes may differ but generally prohibit those required to comply with the sanctions from dealing with frozen funds or economic resources belonging to, or owned, held or controlled by, a sanctioned person or making funds or economic resources available to a sanctioned person; in short, circumventing the asset freezes.

High-profile figures who have been sanctioned include Vladimir Putin (President of Russia), Sergei Viktorovich Lavrov (Russian Foreign Minister), the CEOs of Gazprom and Rosneft and Roman Abramovich (owner of Chelsea Football Club).

Financial sector

  • Several Russian banks have been cut off from the SWIFT messaging system, meaning they cannot use the system for cross-border fund transfers;
  • Prohibitions on dealing in transferable securities or money market instruments of certain Russian sanctioned entities;
  • Prohibitions on dealing in new debt or new equity of entities in relation to certain Russian sanctioned entities;
  • Restricting the granting of loans or credit to Russian individuals and entities;
  • Correspondent banking restrictions have been placed on Russian banks (Sberbank and its subsidiaries only to date); and
  • Full blocking sanctions / full asset freeze.

Banks specifically targeted by one or more of these restrictions include VTB bank, Bank Otkritie, Novikrombank, Promsvyazbank, Bank Rossiya, Vnesheconombank (VEB), Sberbank, Gazprombank and Rosselkhozbank.

Energy sector

Sectoral sanctions targeting the energy sector have been imposed. For example:

  • Under US law, there are prohibitions on activities relating to the production of oil in Russia and related goods and services. These require specific types of projects to be involved; and
  • The EU has introduced new prohibitions on the sale, supply, transfer or export of certain goods and technology, as well ancillary technical assistance or brokering, used for oil refining to any person or entity in Russia or for use in Russia.

Aviation sector

Russia’s aviation sector has been targeted. For example, the EU has prohibitions in place in relation to the sale, transfer, supply or export of aircrafts or aircraft parts to any person (including entity) in Russia or for use in Russia. This extends to use through leasing. There are also restrictions relating to technical assistance, brokering, financing, insurance and reinsurance.

Luxury goods

Restrictions have been placed on exporting luxury goods to Russia. For example, the EU prohibits the export of “luxury” goods over a certain threshold. The lowest of which is €300, so it is not a high threshold one might associate with the word “luxury”. It also applies to many everyday items including alcohol, perfume and clothes (among many other items).


Russia has also been stripped of its Most Favoured Nation (“MFN”) status by G7 countries.[2] MFN status provides a baseline for global trade, ensuring that countries in the World Trade Organisation are treated on an even footing. That is, if a member country offers another member country a lower tariff on particular goods, it must also offer that same tariff to all other member countries. The removal of MFN status from Russia allows countries to apply high tariff rates to Russian goods.

Other sectors

Several other sectors have been targeted by the US, EU and/or UK including:

  • Shipping;
  • Banknotes;
  • Oil, gas and coal imports;
  • Dual-use goods;
  • Critical use goods;
  • Iron and steel imports; and
  • Technology and cyber actors.

This is not exhaustive. Ancillary goods and services relating to any of the impacted sectors are also often prohibited.

5. Ownership and control

We set out in paragraphs 6, 7, and 8 detailed summaries of each of the US, UK and EU regimes. It is important to be aware of the far-reaching consequences of sanctions under ownership and control rules. That is, sanctions often apply not only to those individuals and entities that appear on sanctions lists, but also to entities owned or controlled by sanctioned entities. For example:

  1. under US laws, an entity that is owned, directly or indirectly, 50% or more in the aggregate by one or more persons on the US Department of the Treasury’s Office of Foreign Assets Control’s (“OFAC’s”) Specially Designated Nationals and Blocked Persons List (“SDNs”) is also deemed to be an SDN (“50% rule”). The same applies to certain other OFAC lists; or
  2. the UK and EU have a similar 50% rule (without the aggregation element) but also have a control element. That is, if an entity is controlled by a sanctioned person, it will be deemed to be subject to the same sanctions as that person. There is guidance on the meaning of “control”, and it should not be assumed from the person’s job title alone.

It is important to understand not only who the counterparty or client is in a transaction, but also to do due diligence to ensure beneficial ownership and control is understood such that you are not dealing with an entity that is subject to sanctions even if it does not directly appear on a sanctions list.

6. US sanctions against Russia

The legal framework for sanctions against Russia by the United States is found in multiple authorities, including acts of Congress, Executive Orders issued by the US President and any supporting Directives or regulations issued thereunder by agencies such as OFAC or the Bureau of Industry and Security (“BIS”) of the Department of Commerce. It is critical to take into consideration guidance (such as FAQs) issued by such agencies when assessing US sanctions risk.

Who has to comply with US sanctions?

  1. Primary US sanctions apply to any transaction with a US nexus, including those involving:
  2. US persons (i.e., a US citizen, permanent resident alien or green card holders);
  3. corporate entities organised under the laws of the US (including foreign branches thereof);
  4. any person in the US regardless of nationality; or
  5. transactions denominated in USD.

Primary US sanctions also prohibit US companies/persons from approving, financing, facilitating or guaranteeing any transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a US person (i.e., a facilitation offence).

Any US person in Hong Kong should assume US sanctions apply to them, and ensure they recuse themselves from any prohibited transaction unless a general license or other exemption applies.

In addition, transactions, business arrangements and deals of non-US persons can become subject to the requirements of US sanctions if, for example, a US person is involved (e.g., transactions routed or cleared through the US or denominated in US dollars) or if US-origin goods, software, technology or services are involved. Such transactions subject non-US persons to US sanctions because of a provision in the International Emergency Economic Powers Act (“IEEPA”) which prohibits any person from causing a US person to violate US sanctions.

Non-US persons also face sanctions exposure under the Countering America’s Adversaries Through Sanctions Act (“CAATSA”). Under CAATSA, “secondary” sanctions can be imposed on non-US persons for knowingly making a “significant investment in a special Russian crude oil project”. In determining whether an investment is “significant”, OFAC will consider the totality of the facts and circumstances surrounding the investment and weigh various factors on a case-by-case basis. This will include:

  1. the significance of the transactions to US national security and foreign policy interests;
  2. the nature and magnitude of the investment, including its size relative to the project’s overall capitalisation; and
  3. the relation and significant of the investment to the Russian energy sector.

Investments include arrangements where goods or services are provided in exchange for equity in an enterprise or rights to a share of revenue or profits.

An investment is not significant if US Persons would not require a specific licence from OFAC to make or participate in it.

The most recent wave of sanctions issued by the United States (since 21 February 2022) have been primary sanctions, but that could change as the situation in Ukraine continues. In addition to reserving the possibility of secondary sanctions in case of escalation, the US has coordinated its sanctions with numerous allied countries that have imposed similar sanctions, lessening the need for the US to impose secondary sanctions to discourage non-US persons from engaging in transactions with Russia and Russian parties.

What sanctions have been imposed?

This table provides a high-level overview of the key sanctions issued by the US against Russia.

A. Relevant sanction

B. Summary of prohibited activity (absent an applicable licence or exemption)


SDN designations

  • Blocking sanctions that are placed on over 800 individuals and entities that are added under the relevant Executive Orders to OFAC’s SDN List. This has included sanctions imposed against, amongst others:
    • Vladimir Putin, the President of the Russian Federation;
    • Sergei Lavrov, Russia's Minister of Foreign Affairs;
    • Sergei Shoigu, Russia’s Minister of Defence;
    • Valery Gerasimov, Chief of the General Staff of the Russian Armed Forces;
    • The State Duma (legislature) and 328 members thereof;
    • PJSC Sberbank (and 42 subsidiaries);
    • JSC Alfa-Bank (and 6 subsidiaries and 5 vessels);
    • Other major Russian financial institutions, sovereign wealth funds, and their subsidiaries;
    • Defence-industrial companies;
    • Software and hardware companies;
    • Several oligarchs (but not Roman Abramovich);
    • Russian vessels; and
    • Nord Stream 2 AG and its CEO, Matthias Warnig.

Sanctions also apply to entities directly or indirectly owned 50% or more, in aggregate, by one or more SDNs.

Directive 1A issued by OFAC pursuant to EO 14024


  • Prohibits US financial institutions from participating in secondary market dealing in ruble (₽) and non-ruble denominated bonds issued on or after 1 March 2022 by the Central Bank of Russia, the National Wealth Fund of Russia or the Ministry of Finance of Russia; and
  • This is in addition to the existing prohibitions on participation in the primary market for ruble or non-ruble denominated bonds issued after 14 June 2021 by the above issuers under Directive 1 issued by OFAC.

Directive 2 issued by OFAC pursuant to EO 14024

Correspondent banking

  • Prohibits any US financial institution from opening or maintaining a correspondent account or payable-through account (“CAPTA”) for or on behalf of Sberbank, named Sberbank subsidiaries or any other foreign financial institution that is 50% or more owned by Sberbank;
  • Prohibits US banks from processing transactions in relation to the targeted Sberbank entities; and
  • Events have overtaken the relevance of Directive 2, as the entities it applies to have been fully blocked by designation to the SDN List on 6 April 2022, meaning US persons must freeze and report to OFAC any property or interest in property of an affected entity that comes into their possession or control.

Directive 3 issued by OFAC pursuant to EO 14024

New debt and equity

Prohibits US persons from dealing in new debt or new equity of entities, or their property or interests in property, all transactions in, provision of financing for, and other dealings in new debt of longer than 14 days maturity or new equity where such new debt or new equity is issued of the listed companies (and any entities owned 50% or more, directly or indirectly, by them). The list includes the following prominent entities:

  • Alfa-Bank (since designated an SDN on 6 April 2022);
  • Alrosa;
  • Credit Bank of Moscow;
  • Gazprom;
  • Gazprombank;
  • Gazprom Neft;
  • Rostelecom;
  • Rushydro;
  • Russian Agricultural Bank;
  • Russian Railways;
  • Sberbank (an SDN since 6 April 2022);
  • Sovcomflot; and
  • Transneft.

Directive 4 issued by OFAC pursuant to EO 14024

Russia’s Central Bank

  • Prohibits US persons from conducting direct or indirect transactions with the entities specified as being sanctioned under this Directive 4, namely, the Central Bank of Russia, the National Wealth Fund of Russia or the Ministry of Finance of Russia.
  • This Directive’s prohibitions encompass any transfer of assets to these entities or any foreign exchange transactions for or on behalf of these entities by US persons.
    • However, OFAC guidance clarifies that US persons must only reject transactions with these entities; they are not required to block and report on the assets of the Directive 4 entities that come within their possession.

EO 14065: Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine

Regional embargoes

  • Investments in the so-called Donetsk People’s Republic or Luhansk People’s Republic regions of Ukraine (the “Covered Regions”) by a US person;
  • Importation or exportation of goods, services, or technology to and from the Covered Regions; and
  • Financing, facilitation or guarantee of a transaction by a non-US person which, if performed by a US person, would be prohibited by this EO.

The sanctions under this EO are subject to nine general licences that authorise certain activities, which are briefly summarised below this table.

These regional sanctions are equivalent to those that have been in place in Crimea since its de facto annexation in 2014.

EO 14066: Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts To Undermine the Sovereignty and Territorial Integrity of Ukraine

Energy sector

  • Importation of oil, gas and coal[3] originating from Russia into the US;
  • New investment in the energy sector of Russia by a US person, wherever located; and
  • Any approval, financing, facilitation, or guarantee by a US person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this EO if performed by a US person or within the US.

The latter two bullet points have been superseded by the broader prohibition on any new investment by US persons in Russia issued on 6 April 2022.

EO 14068: Prohibiting Certain Imports, Exports, and New Investment With Respect to Continued Russian Federation Aggression

Import and export controls

  • Prohibits the exportation, reexportation, sale, or supply, directly or indirectly of luxury goods from the US or by a US person wherever located to Russia[4];
  • Import of goods to the US from signature sectors of Russia’s economy such as the fish, seafood, alcoholic beverages and non-industrial diamonds sectors;
  • New investment in any sector of the Russian economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State;
    • This authority has been superseded by the broader prohibition on any new investment by US persons in Russia issued on 6 April 2022;
  • The exportation, reexportation, sale, or supply, directly or indirectly, from the US or by a US person wherever located of USD-denominated banknotes to the Government of the Russian Federation or any person located in the Russian Federation; and
  • Any approval, financing, facilitation, or guarantee by a US person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this EO if performed by a US person or within the US.

6 April 2022 EO (likely EO 14070): Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression

Blanket investment prohibition for US persons

  • Prohibits new investment in the Russian Federation by a US person wherever located;
    • Also prohibits any approval, financing, facilitation or guarantee by a US person of a transaction by a non-US person where the transaction by that non-US person would be prohibited if performed by a US person; and
  • Authorizes the Secretary of the Treasury to prohibit the export, reexport, sale or supply, direct or indirect, from the United States or by a US person of any category of services determined by the Secretary to any person located in Russia.

BIS Implementation of Sanctions Against Russia Under the Export Administration Regulations (“EAR”)

Expanded controls on US-controlled goods, software, and technology

  • Exports, reexports, and transfers (in-country) of all items subject to the EAR[5] and classified in Commerce Control List (“CCL”) Categories 3-9 now require a license to Russia, subject to limited licence exceptions and a licencing policy of denial (i.e., a licence will be denied, except in limited cases, e.g., humanitarian items or items related to flight or maritime safety);
    • CCL Categories 3-9 include many items that are not particularly sensitive from an export controls perspective and did not previously require a licence to Russia, such as electronics and telecommunications items and low-level encryption items;
  • Comprehensive export, reexport and in-country transfer restrictions for the Covered Regions;
  • Two new “Foreign Direct Product Rules”, one less broad but applicable to all of Russia, the other more broad but limited to Russian military end users (“MEUs”);
    • Exports or reexports of items subject to these new rules do not require a BIS license when sent from any of the 33 countries on the Russia Exclusions List because they have committed to implement similar export controls on Russia;
  • Restrictions on Russian MEUs, which previously only applied to certain items, now apply to all items subject to the EAR except for food and medicine or mass-market encryption items (unless intended for Russian government end users or state-owned entities); and
    • As a result of the expansion of MEU restrictions to cover all items subject to the EAR, BIS removed Russian entities previously listed on the MEU List and placed them on the Entity List.

Exceptions and licences

Certain prohibited activities may be allowed if they are licensed by OFAC under either a specific licence or general licence or subject to a licence exception under the EAR.

  • Specific licences
    • Issued by OFAC to a specific person or entity, authorising a particular transaction. A specific OFAC licence requires an application from the specific person or entity and can only be applied for by a US person.
  • General licences
    • This is a category of licence that authorises a particular type of transaction for a class of persons or entities without the need to apply for a licence.
    • OFAC has issued dozens of general licences in relation to Russian sanctions since 21 February 2022 authorising US persons to engage in the prohibited activities for certain purposes, usually for a limited period, allow them time to adjust their affairs in light of the new prohibitions (e.g., for the purposes of winding down positions or related to humanitarian efforts). An up-to-date list of general licences can be found on OFAC’s website here (for general licences relating to Russian Harmful Foreign Activity Sanctions) and here (for general licences relating to Ukraine/Russia related sanctions), among other locations.

Additional offences

In addition to the general sanctions violations that can occur for failing to comply with US sanctions, it is important to remember ancillary offences that exist. In summary:

  1. general prohibitions in relation to sanctions avoidance, evasion and circumvention;
  2. the offence of facilitation that can be committed by a US person; and
  3. the offence of causing a US person to breach US sanctions that can be committed by a non-US person.

7. Key financial sanctions issued by the UK

A wide range of sanction powers is given under the Russia (Sanctions) (EU Exit) Regulations 2019 (“2019 Regulation”), including the ability to issue financial sanctions (e.g., asset freeze and prohibitions on making funds and economic resources available), trade sanctions (ego restrictions on imports, exports, supply of goods and services), transport sanctions (e.g., shipping and aircraft sanctions) and immigration sanctions. Licenses may be issued in respect of activities that would otherwise be prohibited under certain sanctions imposed.

Who has to comply with UK sanctions?

UK sanctions apply to British citizens and UK incorporated entities wherever in the world and any conduct by persons that takes place wholly or partly in the UK or in UK territorial seas. Under new legislation, breach of financial sanctions is a strict liability civil offence, punishable by fines of up to £1 million or 50% of the estimated value of the economic resources made available to the sanctioned party, whichever is greater. Financial institutions in particular will be adopting a cautious and conservative approach to ensure they do not fall foul of sanctions laws.

What sanctions have been imposed?

This table summarises key sanctions imposed by the UK, categorised thematically.[6]

A. Relevant sanction

B. Prohibited activity (absent an applicable licence of exemption

Asset freeze

Asset freezes have been imposed on a number of Designated Persons. A list of Designated Person is maintained by the UK government. Those sanctioned include:

  • Vladimir Putin, the President of the Russian Federation;
  • Sergei Lavrov, Russia's Minister of Foreign Affairs;
  • PJSC VTB Bank (“VTB”), the second-largest state-owned bank in Russia;
  • a number of defence manufacturing companies, including Rostec, Russia’s largest defence company;
  • prominent figures in the Russian financial services sector (for example, Deputy President and Chairman of the Management Board of VTB); and
  • Most recently, a total asset freeze against Sberbank and Credit Bank of Moscow.

UK persons are prohibited from, amongst other things:

  • directly or indirectly, dealing with the funds or economic resources of listed persons and entities; and
  • making funds or economic resources available, directly or indirectly, to or for the benefit of the listed persons.

Asset freezes also apply to entities owned 50% or more by, or controlled by, persons listed.

Correspondent banking

UK credit and financial institutions are prohibited from entering into or continuing correspondent banking relationships with sanctioned banks or their subsidiaries. This applies to correspondent banking accounts in any currency. UK credit and financial institutions are also prohibited from clearing or settling sterling payments to, from or via a designated bank or its subsidiaries.

So far, only Sberbank is subject to these sanctions.


There is an outright ban on all new outward investment to Russia.

Capital market restrictions

Transferable securities and money market instruments

The UK has expanded existing sanctions that have been in place since 2014. It is now prohibited to, in summary:

  • deal in transferable securities or money market instruments with a maturity of greater than 30 days issued on or after 1 March 2022 by UK subsidiaries of certain Russian sanctioned entities (for example, Sberbank, VTB Bank, Gazprom Neft etc). These entities are listed in Schedule 2 of the 2019 Regulation (“Schedule 2 Persons”);
  • deal in transferable securities or money market instruments issued on or after 1 March 2022 issued by a person connected with Russia (“Person Connected with Russia”) or those acting on their behalf or at their direction. A “Person Connected with Russia” includes individuals ordinarily resident in Russia or located in Russia and entities incorporated or constituted under the laws of Russia or domiciled in Russia; and
  • deal in transferable securities or money market instruments issued on or after 1 March 2022 issued or on behalf of, the Government of Russia (i.e., Russian sovereign debt). The scope of the “Government of Russia” is wide and includes public bodies and the Central Bank of the Russian Federation, amongst others.

Issuing loans and credit

The UK has expanded restrictions that have been in place since 2014. It is now prohibited to, in summary:

  • make or grant loans or credit with maturity exceeding 30 days to the Schedule 2 Persons, their non-UK subsidiaries and any entities acting on their behalf or at that direction at any point since Brexit;
  • make or grant loans or credit with maturity exceeding 30 days to the UK incorporated subsidiaries of the Schedule 2 Persons at any time after 1 March 2022;
  • make or grant loans or credit with maturity exceeding 30 days to a Person Connected with Russia and any entities acting on their behalf or at their direction at any time on or after 1 March 2022; or
  • make or grant loans or credit the Government of Russia.

Energy sector

The UK will end all dependency on Russian coal and oil by the end of 2022, and end imports of gas soon after. From the week commencing 11 April, the export of key oil refining equipment and catalysts will also be banned, degrading Russia’s ability to produce and export oil.


In addition to the financial sanctions outlined above, several trade related restrictions have also been issued relating to, for example, the export of dual-use goods and technology, critical industry goods and military goods from the UK to Russia. The prohibition is extensive and applies to a wide range of goods. Critical-use goods for example include items such as telecommunication equipment, sensors, lasers, navigation equipment, computers, diesel engines, aircraft and gas turbine engines and many more.

The UK has also introduced sanctions that target specific sectors. Examples of additional sanctions are those imposed on:

  • the shipping sector, with restrictions such as prohibiting Russian flagged ships from entering UK ports;
  • the iron and steel sector, with a ban on imports of iron and steel;
  • the aviation sector, banning Russian aircraft from overflying or landing in the UK;
  • the export of luxury goods to Russia is now prohibited; and
  • imports on Russia with the disapplication of MFN tariffs.

The above is a small sample of restrictions implemented by the UK in relation to the situation in Ukraine, it is not exhaustive.

Exceptions and licences

Similar to the US regime, there are limited exceptions to general prohibitions and general licences issued by the Office of Financial Sanctions Implementation that permit otherwise prohibited activity, often for the purposes of winding down existing positions. For example, a licence was granted for the winding down of transactions involving VTB and VTB Capital in the UK (now expired) and for certain activity by VTB’s UK subsidiary allowing it to access funds for limited circumstances, like the payment of legal fees and basic needs. Likewise, UK credit and financial institutions were permitted to continue correspondent banking relationships with Sberbank for a limited period (until 31 March 2022). A list of general licence issued by the Office of Financial Sanctions Implementation can be accessed at https://www.gov.uk/government/collections/ofsi-general-licences.

Additional offences

In addition to the primary sanctions’ offences, it is also illegal to engage in actions that, directly or indirectly, circumvent the financial sanctions provisions.

8. Key financial sanctions issued by the EU

The EU applies “restrictive measures” (i.e., sanctions) under its Common Foreign and Security Policy. A Decision is first adopted under Article 28 or 29 of the Treaty of Europe and then implemented either through EU Regulations or member states.

Who has to comply with EU sanctions?

EU sanctions apply to nationals of EU member states and EU incorporated entities, any person on any aircraft or vessel under the jurisdiction of an EU member state and to any person conducting business in whole or in part within the EU.

What sanctions have been imposed?

The following table summarises key financial sanctions imposed by the EU, categorised thematically.[7]

Relevant sanction

Prohibited activity (absent an applicable licence of exemption

  • Prohibition on the provision of SWIFT to key Russian credit institutions and their Russian subsidiaries.[8] Member States are not permitted to grant exceptions to this; and
  • Prohibition on selling supplying, transferring or exporting Euro banknotes to Russia, any entity or person in Russia, the Russian government or Central Bank.
  • Asset freezes have been imposed against a significant number of individuals involved in the Russia government, entities, Russian banks and Russia’s National Security Council.
  • Significant prohibitions have been implemented in relation to the Russian Central Bank and any transactions with those acting on behalf or at the direction of the Russian Central Bank.
  • There is a prohibition on accepting deposits from any Russian national, resident or incorporated entity of over EUR100,000.

Capital market restrictions

Transferable securities and money market instruments

The EU has extended existing sectoral sanctions. It is now prohibited to:

  • deal with (including purchasing and selling) transferable securities and money-market instruments issued after 9 March 2022 by:
    • Russia;
    • the Russian government;
    • Russian Central Bank; and
    • those acting on behalf of or at the direction of the Russian Central Bank.
  • purchase, sell or provide investment services for, or assist in the issuance of, or otherwise deal with, transferable securities and money-market instruments issued after 12 April 2022 by several listed entities and non-EU entities owned more than 50% by those entities or acting at their direction. The entities include:
    • Alfa Bank;
    • Gazprombank;
    • Novorossiysk Commercial Sea Port;
    • Promsvyazbank;
    • Rosselkhozbank;
    • Sberbank;
    • Sovcomflot;
    • Transneft;
    • United Aircraft Corporation;
    • United Shipbuilding Corporation;
    • Uralvagonzavod;
    • VTB Bank.
  • List or provide services on EU registered/recognised trading venues for transferable securities of any Russian public entity (over 50% public ownership).
  • Provide relevant services for transferable securities issued after 12 April 2022 to any Russian national, resident or entity.
  • Sell Euro denominated transferrable securities issued after 12 April 2022 or collective investment schemes with exposure to such securities to any Russian national, resident or entity.

Issuing loans and credit

It is now prohibited to, in summary to:

  • make, or be part of an arrangement to make, new loans or credit after 23 February 2022 to:
    • the Russian government;
    • Russian Central Bank; and
    • those acting on behalf of or at the direction of the Russian Central Bank.
  • make or be part of an arrangement to make new loans or credit after 26 February 2022 to any of the entities listed above in relation to money instruments.

Unlike the UK, there is no maturity threshold under the EU’s rules.

Similar to the US and UK, the above is a small snapshot only. The EU has issued several regulations imposing additional sanctions in relation to several sectors including aviation, energy, technology and dual-use goods as well as luxury goods.

Additional offences

In addition to the primary sanctions’ offences, similar to the US and UK, EU sanctions generally provide for a separate offence for knowingly and intentionally participating in activities that have the object or effect of circumventing the prohibitions imposed under those sanctions.

Forthcoming sanctions

In addition to the above, Ursula von der Leyen, President of the EU Commission has announced the fifth package of EU sanctions against Russia that will soon be brought into law. The key measures will be:

  1. an import ban on coal from Russia into the EU;
  2. a full transaction ban on four key Russian banks;
  3. a ban on Russian vessels and Russian-operated vessels from accessing EU ports;
  4. further targeted export bans in areas in which Russia is vulnerable;
  5. specific new import bans on different sectors including cement, seafood and alcohol; and
  6. a general EU ban on participation of Russian companies in public procurement in Member States.

The sanctions that have been imposed are extensive and all EU businesses with any Russian counterparts should carefully consider what restrictions may apply.

9. Final thoughts

The complexity and momentum of the response we have seen from key international players to the Ukraine crisis thus far is unprecedented. As the Ukraine crisis evolves rapidly, we expect to see further waves of sanctions to be imposed against Russia and Russian entities, as well as further retaliation and countersanctions by Russia.

The far-reaching impact of the international sanctions are already being felt by businesses worldwide, including those in jurisdictions such as Hong Kong which has not issued any unilateral sanctions.

It is imperative that you identify your potential exposure to these sanctions, working through the list of questions we have provided in paragraph 3. In summary, steps should be taken to:

  • ascertain any Russian nexus through clients, counterparties, financial exposures or supply chains;
  • ascertain whether any identified Russian nexus is subject to sanctions directly or indirectly;
  • ascertain the commercial and reputational risk of any Russian nexus; and
  • consider contractual terms and conditions for exit options where a Russian nexus presents a risk outside of your risk appetite.