After introducing the "sectoral sanctions" against Russia on 1 August 2014 (see our Legal Insight of 1 August 2014), the sanctions regime has been tightened further on September 12 as set out in EC Regulation No 960/2014.
The new regulation contains, inter alia, (i) further restrictions on dealing with dual-use goods and technologies, (ii) bans on certain services in regard to certain oil projects and (iii) further limitations on the ability of Russian state banks and companies to access (capital markets) financing. Additionally, the EU designated 24 more individuals to the sanctions list.
- Further sanctions as of 12 September 2014
On 12 September 2014 the sanctions regime was further tightened by EC Regulation No 960/2014. The main additional measures include the following:
- There is now a prohibition to sell, supply, transfer or export dual-use goods and technology to certain Russian entities as listed in Annex I (subject to, inter alia, the grandfathering of contracts concluded before 12 September 2014). This prohibition applies regardless whether the targeted entity is a military end user or if the item will have a military end use. However, currently Annex I includes only defense companies and mixed defense companies. It remains to be seen, whether the EU will expand this list at a later stage. Further, the new regime prohibits to provide financing, financial assistance, technical assistance, brokering services or "other services" related to dual-use goods and technology to entities listed in Annex I.Drilling, well testing, logging and completion services and the supply of floating vessels are now outright prohibited in relation to certain oil projects in Russia (subject to, inter alia, the grandfathering of contracts concluded before 12 September 2014).
- In regards to goods and technology listed in the Common Military List, it is now also prohibited to insure and reinsure the sale, supply, transfer or export of such items.
- It is prohibited to directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments with a maturity exceeding 30 days (instead of 90 days), issued after 12 September 2014 by a sanctioned Russian bank or a Russian entity listed in Annex II or III (including their subsidiaries established outside of the EU and other entities acting on behalf or at the direction of such entities).
- It is prohibited to directly or indirectly make or be part of any arrangement to make new loans or credit with a maturity exceeding 30 days to any of the sanctioned banks or entities mentioned above unless the loan or credit is subject to an exception (e.g. providing emergency funding to meet solvency and liquidity criteria for subsidiaries established in the EU). The wording of the Regulation indicates that this prohibition would also apply to utilizations under pre-sanction dated revolving facility agreements, since these would constitute new loans. This would seem a notable difference to the U.S. sanctions, where applicable authoritative guidance confirms the grandfathering of pre-sanction dated contracts.
- Expanding the list of designated persons
On 12 September 2014, another 24 individuals have been added to the list (see Council Implementing Regulation (EU) No 961/2014). The individuals are mostly politicians in the region of Donetsk and Lugansk or members of the Russian State Duma.
- U.S. sanction regimes
On 12 September 2014, the U.S. Department of the Treasury also tightened their sanctions regime against Russia by broadening the scope of their "sectoral sanctions" issued pursuant to Executive Order 13662. As of 12 September 2014 the following Russian entities are subject to US sanctions: AK Transneft, Bank of Moscow, Gazprom, Gazprom Neft, Gazprombank, Lukoil, Novatek, Rosneft, Rostec, Russian Agricultural Bank, Sberbank of Russia, Surgutneftegas, Vnesheconombank, VTB Bank.
Please contact any member of the Schoenherr team for further details on these developments. We will be delighted to guide you through the sanctions regimes and their implications for your business, working in collaboration with leading US and Russian counsels where appropriate.