Sanctions tracker – latest EU and UK sanctions against Russia

This briefing summarises the latest UK and EU sanctions developments in response to the conflict in Ukraine, and in particular the EU’s ‘fifth package’ of sanctions.

UK

New designations

On 8 April, the Office of Financial Sanctions Implementation announced the addition of three individuals to the UK’s asset freeze list – two daughters of President Putin, and the daughter of Foreign Minister Sergei Lavrov.

In the press release announcing these new designations, Foreign Secretary Liz Truss also referred to recent government analysis indicating that over £275 billion has been frozen as a result of the asset freezes imposed by the UK and international partners in recent weeks. UK sanctions have now been imposed on over 1,200 individuals and entities since February.

EU

EU approves fifth Russia sanctions package – summary

On 8 April, the EU announced the adoption of its fifth Russia sanctions package (the proposals for which were discussed in our previous blogpost).

The package as announced comprises the following elements, discussed in more detail below:

• a prohibition on the purchase, import or transfer into the EU of coal and other solid fossil fuels from Russia;
• a prohibition on access to EU ports for Russian-registered vessels;
• a ban on Russian and Belarussian road transport undertakings, preventing them from transporting goods by road within the EU;
• export bans in respect of goods such as jet fuel, quantum computers and advanced semiconductors, high end electronics, software, sensitive machinery and transportation equipment;
• import bans on products including wood, cement, seafood and liquor;
• a series of targeted economic measures intended to strengthen existing sanctions and close loopholes;
• a “transaction ban” on four Russian banks (as explained below, this has been effected by adding four banks to the EU asset freeze list); and
• additional asset freeze designations of individuals, including in relation to businesspeople, Kremlin officials, and family members of already sanctioned individuals.

We have set out in the following sections an analysis of the relevant legislation, published late on 8 April.

Russian coal: import and purchase restrictions

Council Regulation (EU) 2022/576 (the “Amending Regulation”) amends Regulation (EU) 833/2014 (the “EU Regulation”) and introduces many of the restrictions in the new sanctions package. It came into force on 9 April 2022.

The Amending Regulation introduces a new Article 3j into the EU Regulation, providing that it is prohibited to purchase, import or transfer, directly or indirectly, coal and other solid fossil fuels (as listed in Annex XXII to the EU Regulation) into the EU if they originate in, or are exported from, Russia. The Amending Regulation also introduces prohibitions on the provision of related technical assistance, brokering services, financing or financial assistance. There is an exemption in respect of the execution until 10 August 2022 of contracts concluded before 9 April 2022.

Other import and purchase restrictions

New Article 3i of the EU Regulation provides that it is prohibited to purchase, import or transfer into the EU (directly or indirectly) goods which generate significant revenues for Russia, as listed in Annex XXI of the EU Regulation. The items listed in Annex XXI include (among other things) seafood, chemical products, wood, glass and other materials and certain vessels. There are also prohibitions on related technical assistance, brokering services, financing and financial assistance.

Exemptions apply to the execution until 10 July 2022 of contracts concluded before 9 April 2022.

From 10 July 2022, certain specific products (including potassium chloride) will still be able to be imported, but subject to an annual quota (set in metric tonnes). The import volume quotas will be managed by the Commission and the Member States.

Amendments have also been made to Annex XVII which lists various iron and steel products which are subject to import restrictions (discussed in our previous blogpost).

Access to EU ports

From 16 April, it will be prohibited to provide access to EU ports to any vessel registered under the flag of Russia (Article 3ea, EU Regulation). This also applies to any vessel that has changed its Russian flag or registration to the flag or registration of any other state after 24 February 2022.

There is an exemption for emergencies and Member States may authorise access for a vessel under certain specific circumstances, including in relation to the purchase, import or transport into the EU of (a) natural gas and oil, and certain metal, chemical and iron products (as listed in Annex XXIV to the EU Regulation), (b) pharmaceutical, medical, agricultural and food products whose import is otherwise permitted, and (c) until 22 August 2022, coal and solid fossil fuels (i.e. those products which are subject to the new import ban referred to above). Member States may also authorise access to ports for the transport of nuclear fuel and other goods necessary for civil nuclear facilities, and for humanitarian purposes.

Road transport restrictions

Under new Article 3l, it is prohibited for any road transport undertaking established in Russia to transport goods by road within the EU, including in transit.

This does not apply to the transport of mail as a universal service, or to goods in transit through the EU between the Kalingrad Oblast and Russia (provided that the transport of such goods is not otherwise prohibited by the EU Regulation).

The prohibition will not apply until 16 April 2022 to the transport of goods that started before 9 April, provided that the relevant vehicle was already in the EU on 9 April, or needs to transit through the EU to return to Russia.

Member States may authorise road transportation for various reasons, including in relation to the import into the EU of natural gas oil, including refined petroleum products, as well as titanium, aluminium, copper, nickel, palladium and iron ore, and pharmaceutical, medical, agricultural and food products, whose import is otherwise permitted.  Other authorisation grounds include humanitarian purposes, the functioning of diplomatic and consular missions, and the transfer to Russia of cultural goods on loan.

Export and supply restrictions

It is prohibited to sell, supply, transfer or export (directly or indirectly) to or for use in Russia goods which could contribute to the enhancement of Russian industrial capacities (as listed in Annex XXIII). There are also prohibitions on related technical assistance, brokering services, financing and financial assistance.

Annex XXIII includes a wide variety of goods such as various plants, chemicals, paints and dyes, photographic film, wood and paper products, metals and machinery (among many others).

This prohibition is subject to exemptions for the execution until 10 July 2022 of contracts concluded before 9 April 2022, and in respect of goods which are necessary for the official purposes of diplomatic or consular missions in Russia or international organisations.

Member States may authorise activities which are necessary for humanitarian purposes, such as delivery or facilitating the delivery of assistance, including medical supplies, food or the transfer of humanitarian workers.

The Amending Regulation also makes amendments to certain other existing EU trade sanctions:

• additional items have been added to Annex VII of the EU Regulation (military and defence goods which are subject to restrictions);
• amendments have been made to Annex X (equipment used in oil refining – the list has been expanded to also cover goods used in the liquefaction of natural gas) and Annex XVIII (luxury goods), both of which list specific items which may not be supplied to/for use in Russia;
• an amendment has been made to Article 5aa(3)(a), which is an exception from the “transaction ban” involving certain Russian energy companies. The exception covers transactions for the purchase, import or transport of certain specified energy products and metals. The exception has been extended to cover “direct and indirect” activity, and to cover the purchase, import or transport of relevant goods into the EU, the EEA, Switzerland or the Western Balkans – it had previously been confined to import etc into the EU. The import of coal and other solid fossil fuels has been descoped from the exception, and is now part of a separate exception which lasts only until 10 August 2022 (in line with the import ban discussed above);
• an additional licensing ground has been added in respect of the prohibition on supplying luxury goods to Russia: Member States may authorise the transfer or export to Russia of cultural goods which are on loan in the context of formal cultural cooperation with Russia (new Article 3h(4) of the EU Regulation);
• the restrictions on supplying aviation and space goods to Russia have been expanded to cover jet fuel and fuel additives, as listed in Annex XX to the EU Regulation;
• various amendments have been made to Articles 2 and 2a of the EU Regulation (which impose restrictions on the supply to Russia of dual-use and military/defence goods); and
• a new licensing ground has been introduced in respect of the restrictions on the supply to Russia of aviation and space goods, allowing the execution of a pre-existing aircraft financial lease where it is strictly necessary to ensure lease repayments to an EU entity and no economic resources will be made available to the Russian counterpart, with the exception of the transfer of ownership of the aircraft after full reimbursement of the financial lease (new Article 3c(6) of the EU Regulation).

Other measures

The Amending Regulation also contains the following restrictions and changes:

• an amendment to the existing restrictions in the EU Regulation relating to the acceptance of deposits from Russian account-holders, extending the restrictions to the provision of crypto-asset wallet, account or custody services where the total value of crypto-assets held exceeds €100,000 (see amended Article 5b of the EU Regulation);
• expansion of the existing restrictions on the sale, supply, transfer or export of (physical) euro-denominated banknotes to cover banknotes denominated in any official currency of a Member State;
• expansion of the sale of euro-denominated transferable securities or units in collective investment undertakings providing exposure to such securities, to any Russian national or natural person residing in Russia or any legal person established in Russia. This now covers securities denominated in any official currency of a Member State;
• a new prohibition on the award or continued execution of public procurement contracts to Russian nationals, Russia-incorporated entities, their majority-owned subsidiaries or any persons acting on their behalf or at their direction. This includes, where they account for more than 10 % of the contract value, subcontractors, suppliers or entities whose capacities are being relied on within the meaning of the public procurement Directives. The new restriction is subject to a “grandfathering” provision permitting the execution until 10 October 2022 of contracts concluded before 9 April. There are also a number of comparatively broad licensing grounds (as set out in new Article 3k(2) of the EU Regulation), which cover specific fields (e.g. civil nuclear) and goods (e.g. natural gas and oil, and coal until 10 August 2022) as well as contracts where “the provision of strictly necessary goods or services…can only be provided, or…can only be provided in sufficient quantities, by the [Russian person]”;
• a new prohibition on the provision of direct or indirect support under specified EU or Member State programmes/contracts to any entity established in Russia with over 50% public ownership or control. This is subject to various exemptions (as set out in new Article 5l(2) of the EU Regulation) in respect of areas including humanitarian purposes, climate and environmental programmes, and space programmes; and
• a new prohibition on registering, providing a registered office, business or administrative address as well as management services, to a trust or any similar legal arrangement having as a trustor or beneficiary:
  • Russian nationals or residents;
  • entities established in Russia; or
  • entities owned, controlled or acting on behalf of the above,

together with a prohibition (as of 10 May 2022) on acting as a trustee, nominee shareholder, director, secretary or similar for such a trust. This is subject to (i) an exemption for trustors/beneficiaries who are nationals/residents of Member States, (ii) wind-down provisions permitting the termination by 10 May 2022 of non-compliant contracts, and (iii) licensing grounds including humanitarian purposes and civil society activities;

• The ‘no claims’ provision in Article 11 has been reworded and now expressly applies to claims by non-EU companies whose are majority owed owned by listed persons.

New EU designations

The Council of the EU announced late on 8 April that it was extending its asset freezing measures to an additional 217 individuals and 18 entities. The names of the new designated persons can be found in Council Implementing Regulation (EU) 2022/581. These include four banks, as alluded to in the summary above.

The EU also published new legislation (Council Regulation (EU) 2022/580) amending its existing Russia asset freezing provisions to introduce additional licensing grounds as follows:

• permitting payments for official purposes to or from accounts belonging to or held by a diplomatic mission, consular post or international organisation;
• authorising the release of frozen funds or economic resources belonging to certain newly designated person banks (Otkritie FC Bank, Novicombank, Sovcombank, and VTB Bank) where necessary for the termination by 9 October 2022 of operations, contracts or other agreements concluded with those entities before 8 April; and
• authorising the release of frozen funds or economic resources or the making available of funds or economic resources to a designated person where necessary for the sale and transfer by 9 October 2022 of proprietary rights in an EU entity directly or indirectly owned by a designated person, provided that the proceeds of such sale remain frozen.

New Belarus sanctions

The EU also expanded its current Belarus sanctions framework on 8 April, with the publication of Council Regulation (EU) 2022/577 (the “Belarus Amending Regulation”).

The Belarus Amending Regulation introduces road transportation restrictions on Belarusian operators which are equivalent to those described above in relation to Russia.

It also amends the existing restrictions on the supply to Belarus of euro-denominated banknotes and the sale of euro-denominated securities to cover banknotes and securities denominated in the official currency of any Member State.

Update on EU “Freeze and Seize” Taskforce

The European Commission has published a statement on its “Freeze and Seize” Taskforce, which was established in March 2022 to ensure coordination among Member States in the enforcement of EU sanctions and to explore the interplay between sanctions and criminal law measures such as confiscation of assets.

As part of the Taskforce’s work, it has requested all Member States to share information on the assets frozen so far in their respective jurisdictions. So far, Member States have reported on frozen assets worth €29.5 billion, and have noted that around €196 billion of transactions have been blocked.