Following the weekend's Crimea referendum, the EU and US have taken further steps (building on those outlined in our previous briefing) to impose targeted sanctions in response to the situation in Ukraine.
On 17 March 2014, the EU introduced an asset freeze and travel ban applying to 21 Russian individuals. On the same day, the US introduced a second Executive Order, allowing it to sanction Russian individuals and released a list of 11 Russian and Ukrainian individuals subject to an asset freeze and visa ban under its Executive Orders.
EU Decision 2014/145/CFSP (the "EU Decision") and EU Regulation 269/2014 (the "EU Regulation") were published in the EU Official Journal on 17 March and came into force on the same day. The EU Decision provides that member states shall take the necessary measures to prevent the entry into, or transit through, their territories of those persons listed as responsible for actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. The EU Decision also provides for the imposition of an asset freeze in respect of the same individuals and this is implemented by the EU Regulation.
The full list of individuals subject to these measures appears in Annex I to the EU Regulation and includes (a) Sergey Aksyonov, elected as Prime Minister of Crimea in February 2014, (b) other officials within Crimea who are said to have been involved in the referendum and lobbied for integration of Crimea into the Russian Federation, and (c) various Russian officials including the Chairman of the Security and Defence Committee of the Federation Council, Deputy Speaker of the Federation Council and the Commander of the Black Sea Fleet.
The EU Regulation provides that all funds and economic resources belonging to, owned, held or controlled by the listed persons must be frozen and that no funds or economic resources may be made available, directly or indirectly, to them or for their benefit. The EU Regulation applies within the territory of the EU and to nationals of EU member states and companies incorporated in EU member states.
The EU Regulation follows the usual format for EU asset freezes and contains various grounds on which the authorities in member states may license the release of frozen funds/economic resources or making funds/economic resources available to listed persons. These include payments under pre-existing contracts (under certain circumstances) and the crediting of interest etc. to frozen accounts, as well as payments in respect of basic needs (food, medical care, rent/mortgage payments etc.) and legal expenses. The EU Regulation also prohibits participation in activities the object or effect of which is to circumvent the asset freeze.
Whilst the EU Regulation is directly effective in EU member states without further action (and the EU Decision is binding on member states themselves), the penalties to be imposed on EU companies and individuals for breach of the asset freeze are a matter of domestic member state law. On 18 March 2014, HM Treasury published a Statutory Instrument and Financial Sanctions Notice in respect of these developments.
The EU Foreign Affairs Council met in Brussels on 17 March and adopted conclusions on Ukraine indicating that: "any further steps by the Russian Federation to destabilise the situation in Ukraine would lead to additional and far-reaching consequences for relations in a broad range of economic areas". It therefore remains possible that the EU will take further steps in the coming days.
Also on 17 March, the US Department of the Treasury's Office of Foreign Assets Control ("OFAC") announced that it had listed as specially designated nationals ("SDNs") four Ukraine-based individuals involved in violating Ukrainian sovereignty. These individuals are Sergey Aksyonov and Vladimir Konstantinov (both also designated by the EU), leader of Ukrainian Choice, Victor Medvedchuk and former President Yanukovych (who was designated by the EU earlier this month). These individuals are now subject to the asset freeze and visa ban described in our previous briefing.
President Obama also signed a second Executive Order relating to Ukraine on 17 March. This allows for the imposition of an asset freeze and visa ban on additional categories of SDNs, including persons determined:
- to be an official of the government of Russia;
- to operate in the arms or related materiel sector in Russia;
- to be owned or controlled by, or to have acted or purported to act for or on behalf of (directly or indirectly) a senior official of the Russian government or any other SDN designated under this Executive Order; or
- to have materially assisted, sponsored or provided financial, material or technological support for, or goods or services in support of a senior official of the Russian government or any other SDN designated under this Executive Order.
The Executive Order also prohibits making any contribution of funds, goods or services to or for the benefit of SDNs and imposes a visa ban on them. Any transactions that evade or avoid, have the purpose or evading or avoiding, cause a violation of or attempt to violate any prohibitions in the Executive Order are also prohibited.
Seven individuals have been designated under this new Executive Order. The full list of SDNs has been released by OFAC and includes Dmitry Rogozin, the Russian Deputy Prime Minister.