The European Union has recently agreed to an additional, higher level of sanctions against Russia. The new packages include (i) severe restrictions on doing business in Crimea or Sevastopol, (ii) a significant expansion of the list of designated persons and entities (see our newsletter of 28 March 2014), and most importantly (iii) severe limitations on the ability of Russian state banks to access (capital markets) financing, embargoes on weapons sales (including dual-use goods), as well as prior authorization requirements for the transfer of sophisticated oil drilling technology. 

New sectoral sanctions

A big impact is to be expected from the new "sectoral sanctions" set out in EC Regulation No 833/2014, which was published late on 31 July 2014 and which will take immediate effect.
Effective as of 1 August 2014, this new regime

  • restricts access to capital markets for Russian state banks as defined in Annex III of the Regulation (including their subsidiaries established outside of the EU and other entities acting on behalf or at the direction of such institutions) by setting out prohibitions on purchasing, selling, providing brokering or other assistance in the issuance of or otherwise dealing in debt or equity securities or money market instruments with a tenor exceeding 90 days, in each case if issued after 1 August 2014,
  • prohibits the importing from and exporting to Russia of military goods and related material (subject to the grandfathering of contracts concluded before 1 August 2014),
  • prohibits exporting dual-use goods and technology (these are goods and technology that can be used for both civil and military purposes) to Russian military end users (subject to the grandfathering of contracts concluded before 1 August 2014), and
  • curtails Russian access to sensitive technologies (as listed in Annex II of the Regulation), particularly in the oil sector.

Further, the Regulation prohibits a number of ancillary services in relation to the aforementioned (including brokering and direct or indirect financial or technical assistance in relation to goods that are objects of the embargo).
These prohibitions apply not only within the territory of the EU, its vessels and aircrafts, but also to EU incorporated businesses and nationals of EU Member States, as well as generally in respect of any business done within the EU. 

In addition to impacting trade relations (and related services) with Russian businesses, the new sanctions regime will likely have far-reaching implications for the financial industry, both for new (post 1 August 2014) transactions (Will the syndicated loan market substitute the Eurobond market for Russian banks' refinancing? Will EU subsidiaries of Russian state banks tap the bond markets?), as well as for existing transactions (Will market disruption clauses or force majeure events be triggered? etc.).

Prohibition of imports from Crimea

As of 23 June 2014, EC regulation no 692/2014 prohibits importing goods originating in Crimea and Sevastopol into the EU, as well as providing financing, financial assistance, insurance, and re-insurance relating to such goods.

As of 30 July 2014 (see amendements implemented by Regulation no 825/2014), it is further prohibited to

  • provide financial loans or other credit that would be used in Crimea and Sevastopol for (i) the creation, acquisition or development of infrastructure in the transport, telecommunications, energy sectors, and/or (ii) for the exploitation of oil, gas, and other mineral resources in Crimea and Sevastopol,
  • acquire or extend a participation in  enterprises established in Crimea or Sevastopol that are engaged in (i) the creation or development of infrastructure in the transport, telecommunications, energy sectors, or (ii) the exploitation of oil, gas, or mineral recourses, and
  • create joint ventures with the enterprises mentioned above.

Additionally, it is prohibited to supply specific equipment and technology listed in Annex III of the Regulation no 825/2014 to any persons in Crimea or Sevastopol for use in these regions. These restricted products are also focused on the transport, telecommunications, energy, and oil/gas/minerals sectors.

Expanding the list of designated persons

On 25 July and 30 July 2014, the EU Council designated 23 additional individuals and a further 21 companies responsible for actions undermining Ukraine's territorial integrity to the sanctions list (see Council Implementing Regulation (EU) No 810/2014 and No 826/2014).
Moreover, the EU expanded the legal criteria for designation to enable the designation of, amongst others, all individuals and legal persons, entities, or bodies that actively provide material or financial support to, or are benefiting from, the Russian decision-makers responsible for the annexation of Crimea and Sevastopol or the destabilization of Eastern-Ukraine.


Violations of the EU sanctions regime may constitute criminal offences. In Austria, such violations are punishable with imprisonment of up to five years or a fine of up to 360 daily rates.

Additional sanction regimes

On 16 July 2014, the U.S. Department of the Treasury issued "sectoral sanctions" against Vnesheconombank and Gazprombank and the Russian energy firms Rosneft and Novatek. On 29 July 2014, President Barack Obama announced that these sanctions will shortly be extended to Bank of Moscow, VTB, and Russian Agricultural Bank. Like the EU, the United States is furthermore planning to "block the exports of specific goods and technologies to the Russian energy sector" and "[suspend] credit that encourages exports to Russia." Details on these measures are expected to be formally announced shortly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.