Sanctions, ownership and related issues

Sanctions Briefing Update: Ukraine and Russia: 19 Sep 2014

Published on 19th Sep 2014

This is the latest in our on-going sanctions briefings relating to Ukraine and Russia; this publication updates our previous briefing of 18 August 2014.

Since our August 2014 update, both the EU and US have extended the restrictive measures in place against Russia, increasing the scope of the sectoral sanctions and adding the names of further individuals and companies to their respective sanctions lists. 

A further 24 individuals have been designated by the EU as subject to the existing asset freezes and travels bans, bringing the total numbers to 119 individuals and 23 entities. In the financial services sector, the EU has tightened the restrictions on dealing in transferable securities issued by certain Russian state-owned banks and companies, and introduced a new ban on lending or offering credit to those entities. In the defence sector, the export of dual use products from the EU to Russia has been further restricted, and the energy sector is subject to new restrictions in relation to certain services necessary for the oil industry in Russia. 

The new US measures reflect many of the changes implemented in the EU and are discussed further below. 

European Council increases sectoral sanctions and export restrictions 

On 8 September 2014 the EU adopted Regulation (EU) No 960/2014, amending and replacing parts of Regulation (EU) No 833/2014 of 31 July 2014. The latest measures came into force on 12 September 2014 (except for the new financial services restrictions which came into effect one day later) and include a broadening of the existing sectoral sanctions and export restrictions. The restrictive measures are now as follows: 

Financial Services Sector

  • The following 5 Russian state-owned banks continue to be restricted from accessing the EU capital markets: Sberbank, VTB Bank, Gazprombank, Vnesheconombank (VEB), and Rosselkhozbank. These restrictions have now been extended to 3 Russian state-owned energy companies (Rosneft, Transneft and Gazprom Neft) and 3 state-owned defence companies (OPK Oboronprom, United Aircraft Corporation and Uralvagonzavod).
  • The restrictive measures imposed on these entities (now 11 in total) have also been increased. EU investors are prohibited from directly or indirectly purchasing, selling, providing investment services or assistance in the issuance of, or otherwise dealing with, “transferable securities” and “money-market instruments” with a maturity exceeding 30 days, issued after 12 September 2014 by these entities. The previous restrictions applied only to transferable securities and money-market instruments with a maturity exceeding 90 days.
  • This prohibition extends to transferable securities or money-market instruments issued by any 50% subsidiaries of these entities based outside of the EU or any entity acting on behalf of those entities or their affected subsidiaries.
  • Additionally, it is now prohibited for EU parties to directly or indirectly make (or be part of any arrangement to make) new loans or credit with a maturity in excess of 30 days to the above entities. Loans or credit from these entities are not prohibited and there is no wider asset freeze in place against them. Exemptions are available for loans or credit with a specific and documented objective to provide financing for non-prohibited imports or exports, non-financial services and also (in specified circumstances) emergency funding for solvency or liquidity requirements. 

Defence Sector

  • An embargo remains in place on the export and import of arms and related material to and from Russia together with an export ban on ‘dual use goods and technology’ if intended for Russian military use. This embargo has now been extended to exports of ‘dual use goods and technology’ to 9 particular companies (including JSC Tula Arms Plant and JSC Sirius) listed in Annex IV of Regulation (EU) No 960/2014
  • The ‘dual use goods and technology’ are listed in Annex 1 to Regulation (EC) No 428/2009. The list includes software and technology, which can be used for both civil and military purposes as well as goods which can be used for both non-explosive purposes and assisting in the manufacture of nuclear explosive devices. The UK interprets the arms embargo to apply to all goods and technology on the Military List.
  • Related prohibitions on the provision of technical assistance, brokering services and financial assistance in relation to these goods and technology are also in place. 

Energy Sector

  • The restrictions on the export of certain high-tech goods for use in the oil sector remain in place, with new restrictions on related services. Authorisation is required for the export of the technologies listed in Annex II of Regulation (EU) No 833/2014. The list includes certain technologies suited to the oil industry. An export licence will be denied if such technology is intended for use in deep water, Arctic or shale oil exploration and production in Russia.
  • It is now also prohibited to directly or indirectly provide certain services (including drilling and well testing) necessary for deep water, Arctic or shale oil exploration and production. This new prohibition does not apply to contractual obligations which arose prior to 12 September 2014.

EU adds further names to its existing sanctions list 

In addition to increasing the sectoral sanctions, on 8 September 2014 Council Regulation (EU) 961/2014 added a further 24 individuals to the sanctions list first established by Council Regulation (EU) 269/2014 of 17 March 2014. The new names include political and military figures involved in the ‘Donetsk People’s Republic’ and ‘Lugansk People’s Republic’. The applicable restrictive measures include an asset freeze, travel ban, and a prohibition on making funds available to the listed individuals and entities. 

Council Regulation (EU) 269/2014 was further amended by Council Regulation (EU) 959/2014 on the same day in order to increase the scope of its stated aims to include sanctions against persons involved with separatist groups in the Donbass region in eastern Ukraine. 

The total number of persons subject to these EU measures now stands at 119 individuals and 23 entities deemed to be responsible for “undermining the territorial integrity, sovereignty and independence of Ukraine” including the ‘Lugansk and Donetsk People’s Republics’. 

Restrictive measures: Crimea and Sevastopol 

At a meeting on 20-21 March 2014, the European Council emphasised that it would not recognise the annexation of Crimea and Sevastopol to the Russian Federation and on 23 June introduced restrictive measures banning the import (or financial assistance relating to the import) of any goods originating in these regions. On 30 July 2014 these restrictive measures were increased to the following activities with regard to Crimea and Sevastopol:

  • A specific range of investment activities are prohibited if they relate to the development of infrastructure or the exploitation of oil, gas or mineral resources in the region.
  • An export ban on ‘key equipment and technology’ related to the creation, acquisition or development of infrastructure in the regions. The equipment and technology are listed in Annex III to Regulation (EU) No 825/2014. This prohibition extends to any technical or financial assistance relating to the export of these items. 

The US sanctions 

Following the NATO Summit in Wales on 5 September 2014 and the EU’s new measures of 8 September, the US has also taken steps to increase its restrictive measures against Russia. The US measures reflect many of the changes implemented in the EU and include:

  • The addition of 5 further entities to the US Treasury Department’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons List (SDN List). Inclusion on the SDN List means that US persons (defined broadly) are prohibited from directly or indirectly dealing with the listed parties, their property or with any subsidiaries of which they own at least 50%.
  • The extension of financing restrictions in place against the Bank of Moscow, Gazprombank, Russian Agricultural Bank, Vnesheconombank and VTB Bank. These measures now prohibit US persons from dealing in new debt of longer than 30 days maturity (decreased from 90 days), or from dealing in new equity issued by those entities. Sberbank (Russia’s largest bank) has also been added to this list.
  • Restrictions on dealing in debt of more than 90 days maturity (but not dealings in new equity) issued by AK Transneft, Rosneft, Gazprom Neft and Novatek. Rostec (an industrial technology company) is subject to restrictions on debt of longer than 30 days maturity (but not to new equity restrictions).
  • Restrictions on the export of certain goods and services relating to deepwater, Arctic offshore, or shale projects that have the potential to produce oil from the US to 5 Russian energy companies: Gazprom, Gazprom Neft, Lukoil, Surgutneftegas and Rosneft.

13 March 2014 update

21 March 2014 update

30 April 2014 update

13 May 2014 update

18 July 2014 update

18 August 2014 update

19 September 2014 update


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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