In a sign that governments in the EU and US are increasingly losing patience with the situation in Ukraine, and that they see sanctions and other trade restrictions as a useful tool to put pressure on Mr Putin and others, three sets of further EU restrictions were imposed this week – two on 30 July and one on 31 July.
As the EU Council explained on 31 July, "It is therefore considered appropriate to apply additional restrictive measures with a view to increasing the costs of Russia's actions to undermine Ukraine's territorial integrity, sovereignty and independence and to promoting a peaceful settlement of the crisis. These measures will be kept under review and may be suspended or withdrawn, or be supplemented by other restrictive measures, in light of developments on the ground."
The measures affect trade with Russia in certain goods (including equipment and technology for the oil industry), trade with the transport, telecommunications, energy and oil/gas/mineral resources sectors in Crimea and Sevastopol, finance (by limiting certain Russian banks' access to EU capital markets), and any dealings with newly listed individuals and entities.
As ever, businesses need to remain vigilant, understand the risks of a sanctions violation, and take steps to mitigate those risks.
Equipment and technology for the oil industry in Russia
There is now a requirement that prior authorisation is obtained for any sale, supply, transfer or export, directly or indirectly, of certain technologies (whether or not originating in the EU) which are "suited to the oil industry for use in deep water oil exploration and production, Arctic oil exploration and production, or shale oil projects in Russia".
The relevant products are identified in one of the Annexes to the Regulation. They are widely defined, and the Regulation makes clear that (other than in the case of execution of contracts concluded before 1 August 2014) authorisations shall not be granted where there are reasonable grounds to determine that the products are for projects pertaining to deep water oil exploration and production, Arctic oil exploration and production, or shale oil projects in Russia.
The restriction applies where the supply is to any natural or legal person, entity or body in Russia. It also applies where the supply is to any natural or legal person, entity or body in any other country, if the equipment or technology is for use in Russia.
Any business which is supplying equipment for the oil industry in Russia or for use in Russia needs to take a very careful look at the detailed provisions of the Regulation (including the Annex) to satisfy themselves that they can continue to supply that equipment, before taking any further action.
Dual use goods and technology
The EU has imposed a ban on the supply of dual use goods and technology (whether or not originating in the EU) to any natural or legal person, entity or body in Russia or for use in Russia, if those items are or may be intended, in their entirety or in part, for military end use or for a military end user.
Authorisations may be granted for the execution of contracts concluded before 1 August 2014.
Restrictions relating to Crimea and Sevastopol
New investments related to infrastructure in the areas of transport, telecommunications and energy in Crimea and Sevastopol are now banned.
New investments related to the exploitation of oil, gas or mineral resources in Crimea and Sevastopol are also now banned. Mineral resources are defined by reference to a nine page list of substances.
There are also bans on the supply of key equipment and technology related to the transport, telecommunications, energy and oil/gas/mineral resources sectors in Crimea and Sevastopol (albeit with a grandfathering provision allowing execution until 28 October 2014 of certain contracts concluded prior to 30 July 2014, provided advance notice is given to the relevant authorities).
Restrictions on access to EU capital markets
The EU has imposed a ban on directly or indirectly purchasing, selling, providing brokering or assistance in the issuance of, or otherwise dealing with certain transferable securities and money-market instruments with a maturity exceeding 90 days, issued after 1 August 2014.
The ban applies to relevant securities and money-market instruments issued by:
- Certain Russian banks (currently Sberbank, VTB Bank, Gazprombank, Vnesheconombank (VEB) and Rosselkhozbank),
- Legal entities outside the EU of which any of those Russian banks own more than 50%, and/or
- Anyone acting on behalf of or at the direction of one of those Russian banks.
On 25 July, the EU further widened the grounds on which individuals and entities may be listed as asset freeze targets, to include "natural or legal persons, entities or bodies who actively provide material or financial support to, or are benefiting from, Russian decision-makers responsible for the annexation of Crimea and Sevastopol or the destabilisation of Eastern-Ukraine."
Eight individuals (including four who have been described in the press as Mr Putin's "cronies") and three entities were added to the EU sanctions list on 30 July.
The individuals are (i) Alexey Alexeyevich Gromov, (ii) Oksana Tchigrina, (iii) Boris Litvinov, (iv) Sergey Abisov, (v) Arkady Romanovich Rotenberg, (vi) Konstantin Valerevich Malofeev, (vii) Yuriy Valentinovich Kovalchuk, and (viii) Nikolay Terentievich Shamalov.
The entities are (i) Joint-Stock Company Concern Almaz-Antey (a.k.a. Almaz-Antey Corp; a.k.a. Almaz-Antey Defense Corporation; a.k.a. Almaz- Antey JSC, (ii) Dobrolet a.k.a. Dobrolyot, and (iii) Russian National Commercial Bank.