knowledge 4 March 2022 |

EU Sanctions Targeting Russia: Key Developments

Background

Russia’s annexation of Crimea in March 2014 led to the introduction of a suite of EU sanctions targeting Russian individuals, entities and specific sectors. Our earlier briefing here details these measures and provides a general overview of the EU sanctions framework.

In response to the invasion of Ukraine, the EU has introduced significant further restrictive measures in respect of Russia. These new measures build upon the existing sanctions legislative framework¹ and expand its scope substantially.

Key Developments

1. Asset Freezes

The criteria for designating individuals and entities subject to restrictions has now been expanded to include (a) natural and legal persons, entities and bodies supporting, materially or financially, or benefitting from, the Government of the Russian Federation, and (b) leading businesspeople and legal persons, entities and bodies involved in economic sectors providing a substantial source of revenue to the Government of the Russian Federation².

As a result, the EU ‘asset freeze’ list now includes members of the National Security Council of the Russian Federation, President Vladimir Putin, Sergey Lavrov, persons said to have facilitated Russia’s military aggression from Belarus, members of the Russian State Duma, certain banks (such as Bank Rossiya) and a gas industry insurance company, SOGAZ³.

2. Dual-Use Goods and Technology

Regulation (EU) 2022/328 imposes further restrictions on the sale, supply, transfer and export (directly or indirectly) of dual-use goods and technology to any natural or legal person, entity or body in Russia or for use in Russia (irrespective of whether such goods and technology are intended for military use or for a military end-user). This prohibition also applies to the provision of related services. Certain limited exceptions are provided for.

3. Defence and Security Sector

Regulation (EU) 2022/328 prohibits the sale, supply, transfer and export (directly or indirectly) of certain goods and technology (listed in the Annex thereto) which might contribute to Russia’s military and technological enhancement, or the development of the defence and security sector, to any natural or legal person, entity or body in Russia or for use in Russia. This prohibition also applies to the provision of related services. Certain limited exceptions are provided for.

4. Energy and Transport Sectors

Regulation (EU) 2022/328 prohibits the sale, supply, transfer or export (directly or indirectly) to Russia of specific goods and technologies suited for use in oil refining to any natural or legal person, entity or body in Russia or for use in Russia. This prohibition also applies to the provision of related services. Certain limited exceptions are provided for.

5. Financial Sector

Regulation (EU) 2022/328 amends existing sanctions and introduces a number of new sanctions relating to the financial sector⁴. We have highlighted the key measures in the table below.

 

Financial Sector – Key Measures
Transferable Securities and Money-Market Instruments	A prohibition on (directly or indirectly) purchasing, selling, providing investment services for or otherwise dealing with transferable securities and money-market instruments issued by specified Russian entities (including entities listed in the Annexes thereto). Specified maturity requirements no longer apply for those transferable securities and instruments issued after 12 April 2022.
New Loans and Credit	A prohibition on (directly or indirectly) making or being part of any arrangement to make new loans or credit available to specified Russian entities (including entities listed in the Annexes thereto). The maturity requirements for loans/credit granted after 26 February 2022 has been removed from this prohibition. Certain exceptions apply for drawdowns under existing agreements which meet specified criteria.
Trading Venues	A new prohibition on the listing and provision of services in relation to transferable securities of Russian state-owned entities on EU trading venues (with effect from 12 April 2022).
Central Securities Depositories	A new prohibition on EU central securities depositories providing specified services for transferable securities issued after 12 April 2022 to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia.
Transferable Securities and Units in Collective investment undertakings	A new prohibition on selling euro-denominated transferable securities issued after 12 April 2022, and on selling units in collective investment undertakings providing exposure to such securities, to any Russian national, to any natural person residing in Russia or to any legal person, entity or body established in Russia.
Deposits	A new prohibition on the acceptance of deposits with a total value exceeding €100,000 from any Russian national or resident and from any legal person, entity or body established in Russia. Certain exceptions apply.

6. Aviation Sector

Regulation (EU) 2022/328 introduces a prohibition on the sale, supply, transfer and export (directly or indirectly) of goods and technology suited for use in aviation or the space industry to any natural or legal person, entity or body in Russia or for use in Russia. This prohibition also applies to the provision of related services (including insurance and reinsurance) and certain related activities (such as the repair or modification of aircraft (with the exception of pre-flight inspections)).

Regulation (EU) 2022/334 also imposes further restrictive measures on Russian aircraft landing in, taking off from, or overflying the EU (subject to certain exceptions, ie, emergency landings)

7. Public financing or financial assistance for trade with /investment in Russia

Regulation (EU) 2022/328 prohibits the provision of public financing or financial assistance for trade with, or investment in, Russia. Certain exceptions apply.

8. SWIFT

The EU has excluded seven Russian banks from the SWIFT messaging system⁵. This restrictive measure takes effect on 12 March 2022.

9. Further restrictive measures

Further measures introduced include a prohibition on dealings with the Russian Central Bank, restrictions on exporting euro-denominated banknotes to Russia and the partial suspension of visa arrangements between the EU and Russia.

Comment and next steps

The EU’s sanctions regime has wide application: the regime applies not only within the territory of the EU, but also to any person who is a national of an EU Member State, to any legal person incorporated or constituted under the law of a Member State and to any legal person in respect of any business done in whole or in part within the EU.  Therefore, recent developments will have a broad impact.

Notwithstanding the fast pace of developments in this area, risk and compliance frameworks should be updated regularly and implemented fully.  McCann FitzGerald LLP will continue to monitor and analyse these and related topics.