Sanctions tracker – Latest moves include fast-tracked UK Economic Crime Act and EU's fourth round of measures

UK and EU keep up the pace of sanctions against Russia amid sustained Ukraine conflict

UK

Passage of new economic crime legislation

The Economic Crime (Transparency and Enforcement) Act 2022 (the Act) received Royal Assent during the early hours of 15 March, following its expedited passage through the legislative process.

In summary, the Act contains the following key measures:

• provision for an expedited procedure under which the UK can impose asset freezing sanctions on designated persons already subject to sanctions in an allied jurisdiction;
• the introduction of expanded sanctions enforcement powers for the Office of Financial Sanctions Implementation (OFSI);
• introduction of a new Register of Overseas Entities in relation to the ownership of UK property; and
• reforms to the unexplained wealth order process.

The press release announcing publication of the Act also noted that the Home Secretary Priti Patel would attend the inaugural ministerial Russian Elites Proxies and Oligarchs Task Force on 16 March, which brought together finance and justice and home affairs ministers from the G7, EU and Australia responsible for the supervision of sanctions and enforcement work. This Task Force “aims to ensure the effective implementation of financial sanctions on Russian elites and oligarchs to further drive collective efforts to tackle Kremlin-linked illicit finance”.

New designations

Following the passage of the Act, OFSI announced the addition of 350 Russia-related entries to the UK’s asset freeze list. The vast majority of these are individuals, designated under the Act’s new “urgent procedure” on the basis of their previous designation by the EU, US, Australia and/or Canada, including a number of Members of the Federation Council of the Russian Federation. The newly-designated entities are: Gas Industry Insurance Company SOGAZ, Geopolitica, Internet Research Agency, New Eastern Outlook, and Oriental Review, all of which have been designated by the EU and/or US.

OFSI also announced the designation of eight further individuals and one entity under the UK’s cyber sanctions regime, all of whom are already subject to US Russia/cyber-related sanctions.

A further round of designations was announced during the evening of 15 March. This comprised the designation of 12 further individuals, and two further entities under the UK’s Russia regime, in all cases based on existing EU designations.

New trade sanctions: export tariffs and export finance support

On 15 March, the UK announced it would deny Russia and Belarus access to Most Favoured Nation tariffs for hundreds of their exports, publishing an initial list of goods which will now face an additional 35% tariff. The affected products are: iron, steel, fertilisers, wood, tyres, railway containers, cement, copper, aluminium, silver, lead, iron ore, residue/food waste products, beverages, spirits and vinegar, glass and glassware, cereals, oil seeds, paper and paperboard, machinery, works of art, antiques, fur skins and artificial fur, ships, and white fish.

The press release reports that the tariff increases will be legislated for using powers under the Taxation (Cross-border Trade) Act 2018, and will be operationalised in the relevant customs systems next week (w/c 21 March).

On the same day, the UK announced that it would no longer issue any new guarantees, loans and insurance for exports to Russia and Belarus.

The Department for International Trade has expanded its Export Support Service to act as a single point of contact for businesses with questions about trading with Russia or Ukraine.

New export restrictions announced (not yet in force)

On 15 March, the UK also announced further Russian trade sanctions which will take the form of a ban on the export to Russia of listed luxury goods. These measures are not yet in force, and the list of affected items has yet to be published, although the press release notes that the restrictions “will likely affect luxury vehicles, high-end fashion and works of art”. It is anticipated that they will broadly mirror the new EU luxury goods restrictions mentioned below.

The export restrictions are to come into force “shortly”.

FCA statement on Russian divestments

On 13 March, the FCA responded to Chancellor Rishi Sunak's call for firms to stop investing in Russia, noting that there are currently significant practical challenges in terms of disposing of Russian assets and reminding firms to comply with sanctions requirements when carrying out any such transactions.

EU

On 15 March, the Council of the EU announced the formal agreement of a fourth package of EU sanctions against Russia, comprising the following:

• a prohibition on any transactions with certain Russian state-owned enterprises (SOEs);
• a prohibition on the provision to Russian persons of credit rating services, as well as access to related subscription services;
• an expansion of the list of Russian companies on whom specific export restrictions have been imposed regarding dual-use goods;
• a ban on new investment in the Russian energy sector and expansion of the existing trade sanctions regarding equipment, technology and services relevant to the energy sector;
• trade restrictions on iron and steel products, and luxury goods; and
• further designations of additional oligarchs and business elites, as well as military/defence.

Further detail on the new restrictions is contained in the underlying legislation, which was published in the Official Journal on 15 March. We have provided a summary of the key measures below.

The Commission has also published a Q&A on the fourth sanctions package.

Restrictions on dealing with Russian SOEs (in force from 16 March)

The majority of the new restrictions outlined above are contained in Council Regulation (EU) 2022/428 (Regulation 2022/428), amending Regulation (EU) No 833/2014 (the 2014 Russia Regulation). Regulation 2022/428 introduces a new Article 5aa into the 2014 Russia Regulation which prohibits engaging directly or indirectly in any transaction with: (i) the SOEs listed in Annex XIX of the 2014 Russia Regulation, (ii) non-EU entities owned as to more than 50% by an entity falling within (i) above, or (iii) any legal person, entity or body acting on behalf of, or at the direction of, an entity falling within (i) or (ii) above.

The following exemptions apply to this prohibition:

• the execution until 15 May 2022 of contracts concluded before 16 March;
• transactions which are strictly necessary for the purchase, import or transport of fossil fuels, as well as titanium, aluminium, copper, nickel, palladium and iron ore from or through Russia into the EU; and
• transactions related to energy projects outside Russia in which an entity listed in Annex XIX is a minority shareholder.

Annex XIX contains the following: OPK Oboronprom, United Aircraft Corporation, Uralvagonzavod, Rosneft, Transneft, Gazprom Neft, Almaz-Antey, Kamaz, Rostec, JSC PO Sevmash, Sovcomflot, and United Shipbuilding Corporation. Although these entities have not been added to the EU’s designated persons list (such that there is no requirement to freeze their assets), the new measures will likely substantially restrict EU companies’ ability to do business with these entities, in particular after 15 May 2022 when the ‘grandfathering’ of existing contracts ceases to apply.

Credit rating services (in force from 16 March but takes effect as of 15 April)

As of 15 April 2022, the following will be prohibited under Article 5j of the 2014 Russia Regulation:

• the provision of credit rating services to any Russian national or natural person residing in Russia, or any entity established in Russia; and
• the provision of access to any subscription services in relation to credit rating activities to the same Russian persons.

There is an exemption for nationals or temporary/permanent residents of an EU Member State.

For these purposes, “credit rating” means an opinion regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, or of an issuer of such an obligation, security or instrument, issued using an established and defined ranking system of rating categories. “Credit rating activities” mean data and information analysis, and the evaluation, approval, issuing and review of credit ratings.

Dual-use goods (in force from 16 March)

Annex I to Regulation 2022/428 adds a number of additional entities to Annex IV of the 2014 Russia Regulation, bringing them within scope of the existing dual-use goods restrictions. Member State competent authorities may only issue a licence for the supply of dual-use goods (or related technical financial assistance) to Annex IV entities after having determined that such supply is necessary for health and safety grounds, or is due under a contract concluded before 26 February 2022 (provided the licence is sought before 1 May 2022).

Energy sector restrictions (in force from 16 March)

Companies operating in the energy sector will likely be familiar with the “Annex II” restrictions introduced by the 2014 Russia Regulation (these required prior authorisation for the supply to Russia of certain listed oil and gas equipment, with authorisation requests to be denied in respect of certain exploration and production projects). Regulation 2022/428 replaces those restrictions with a prohibition on the supply to Russia of Annex II items, along with related technical assistance, brokering services, financing or financial assistance.

This prohibition is subject to the following exemptions:

• supply of goods (or related technical or financial assistance) necessary for:
  • the transport of fossil fuels from or through Russia into the EU; or
  • the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment;
• the execution until 17 September 2022 of an obligation arising from a pre-16 March contract (subject to a requirement to make a prior notification to the relevant Member State competent authority); and
• the provision of insurance or reinsurance to any EU entity with regard to its activities outside the energy sector in Russia.

Member State competent authorities may also license the supply of Annex II equipment or relevant technical/financial assistance if: (i) it is necessary for ensuring critical energy supply within the EU; or (ii) it is intended for the exclusive use of entities owned, or solely or jointly controlled by an EU-incorporated entity.

Regulation 2022/428 also prohibits the following:

• acquisition of any new, or extension of any existing, participation in any entity incorporated under the law or Russia or any third country and operating in the energy sector in Russia;
• granting or being part of any arrangement to grant any new loan or credit, or otherwise providing financing (including equity capital) to any entity incorporated under the law or Russia or any third country and operating in the energy sector in Russia, or for the documented purpose of financing such a person;
• creating any new joint venture with any entity incorporated under the law of Russia or any third country and operating in the energy sector in Russia; and
• providing investment services in relation to the above activities.

Member States may license such activities if: (i) they are necessary for ensuring critical energy supply within the EU; or (ii) they exclusively concern entities owned by an EU-incorporated entity.

Other trade sanctions (in force from 16 March)

Regulation 2022/428 introduces a new Annex XVII to the 2014 Russia Regulation, listing various iron and steel products. It is now prohibited to:

• import Annex XVII products into the EU if they originate in or have been exported from Russia;
• purchase Annex XVII products which are located in or originate in Russia;
• transport Annex XVII products if they originate in Russia or are being exported from Russia to any other country; and
• provide technical assistance, brokering services, financial or financial assistance (including financial derivatives as well as insurance and reinsurance) relating to the above prohibitions.

These restrictions are subject to an exemption in respect of the execution of pre-existing contracts until 17 June 2022.

Regulation 2022/428 also inserts into the 2014 Russia Regulation a new Annex XVIII listing various luxury goods. It is prohibited to sell, supply, transfer or export Annex XVIII goods to any natural or legal person, entity or body in Russia or for use in Russia, insofar as their value exceeds €300 per item (unless otherwise specified in Annex XVIII). This is subject to an exemption in respect of goods which are necessary for the official purposes of diplomatic or consular missions of Member States or partner countries, international organisations, or the personal effects of their staff.

Additional designations (in force from 15 March)

The EU has added a further 15 individuals and nine entities to its Russia-related asset freeze list. The full list of names can be found in Council Implementing Regulation (EU) 2022/427.

This article first appeared on our Sanctions Notes blog. Our team will bring you updates as they happen.