Russian Risk: Transactions With Russian Banks And Exports To Russia Create Greatest Exposure Under New EU And UK Ukraine-Related Sanctions -

Updated as of February 25, 2022

Key Takeaways of EU and UK Recent Actions Against Russia and Ukraine Breakaway Regions

The EU adopted the first tranche of sanctions restrictions targeting financial institutions, other entities, and individuals, and imposing territorial restrictions on Donetsk and Luhansk. The Member of the Council has agreed on a second tranche of sanctions, which is now being finalized before adoption.
In the UK, Prime Minister Boris Johnson has promised and adopted a "massive package of economic sanctions" including asset freeze restrictions; potential exclusion of Russian banks from the UK financial system, including preventing access by such banks to GBP and clearing services in the UK; and dual-use export restrictions to Russia.

EU Restrictive Measures

On February 22, 2022, EU leaders have "unanimously agreed" on a list of measures against Russia. The next day, the Council adopted the following sanctions:

Asset freeze measures against Russian lawmakers (including 336 members of the Russian State Duma who voted for the recognition of the DNR and LNR),¹ as well as 27 individuals² and entities³ in the political, military, business and media sectors, including banks associated with the DNR and LNR;⁴
Sectoral prohibition on financing for Russia and its government, the Central Bank of Russia, or any entity acting on behalf of or at the direction of the Central Bank of Russia, subject to certain conditions.⁵
Restrictions targeting economic relations between the EU and the DNR and LNR. In particular, those include:
- an import ban on goods from the non-government controlled areas of the Donetsk and Luhansk;
- a prohibition on certain investment in the regions;
- an export ban for goods and technologies suited to the transport, telecommunications, energy or oil, gas and mineral sectors;
- a ban on the provision of technical assistance, brokering, construction or engineering services to infrastructure in the regions and within the aforementioned sectors;
- as well as a prohibition to supply tourism services.

On a separate, but related note, on February 22, German Chancellor Olaf Scholz has taken steps to halt the process of certifying the Nord Stream 2 gas pipeline from Russia.

On February 24, 2022, the Council reunited at 8PM CET to decide on new sanctions to be imposed.

The Council's conclusions state that new sanctions would cover the financial sector, the energy and transport sectors, dual-use goods, other export controls, export financing, visa policy, additional listings of Russian individuals, and new listing criteria. Although the exact coverage of those new measures has not yet been disclosed, EU foreign affairs ministers met on February 25, 2022 in Brussels to proceed with the adoption of those restrictive measures.

UK Sanctions

On February 22, 2022, UK Prime Minister Boris Johnson announced the designation (see OFSI Notice) of 5 Russian banks⁶ and 3 oligarchs.⁷ The sanctions have been imposed pursuant to the recently amended Russia (Sanctions) (EU Exit) Regulations 2019.⁸ UK persons are prohibited from providing funds or economic resources to the benefit of the designated banks and individuals. This includes transfers involving accounts held by non-sanctioned individuals at the designated banks. Additionally, dealings with entities owned or controlled by the newly designated parties will generally be considered as prohibited by the sanctions.

On February 23, 2022, in addition to those designations, UK Foreign Secretary Liz Truss announced the following additional sanctions:

Designation of the members of the Russian Duma and Federation Council who voted to recognize the independence of the DNR and LNR; and
Extension over the "coming weeks" of the territorial sanctions imposed on Crimea to non-government controlled territory in Donetsk and Luhansk.

Following the invasion of Ukraine by Russia, Prime Minister Johnson announced a second package of Russia sanctions in response to Russia's invasion of Ukraine. According to his Statement in the House of Commons, the package includes:

Asset freezes on all major Russian banks, including VTB Bank;
New legislation (to be released on Tuesday according to various reports), to prohibit Russian state and private companies from raising finance on UK markets and to prevent Russia raising sovereign debt on UK markets;
Asset freezes on over 100 individuals and entities, including all major manufacturers who support "Putin's war machine". As of today, the following have been designated by the British Office of Financial Sanctions Implementation (OFSI): Denis Alexandrovich Bortnikov; Petr Fradkov; Elena Alexandrovna Georgieva; Kirill Nikolaevich Shamalov; Yury Slyusar; UralVagonZavod; PJSC United Aircraft Corporation (UAC); PJSC United Shipbuilding Corporation (USC); Rostec; JSC Tactical Missiles Corporation (TMC); and VTB Bank;⁹
A ban on Aeroflot landing in the UK;
Caps on the amount of money Russian nationals can deposit into UK bank accounts;
New legislation to be introduced to prohibit the export of dual-use items to Russia, including high end and critical technical equipment suited to the electronics, telecommunications and aerospace sectors, and oil refinery equipment; and
Sanctions on Belarus for its role in Russia's invasion of Ukraine.

In its allocution, Prime Minister Johnson also announced that the UK:

Is working with partner governments to shut off Swift payments;
Will bring forward part of the Economic Crime Bill before the Easter recess, including measures on Unexplained Wealth Orders; and
Will establish a "Kleptocracy Cell" within the National Crime Agency to target sanctions evasion in the UK.

Footnotes

1 See Council Decision (CFSP) 2022/267 & Council Implementing Regulation (EU) 2022/261.

2 Listed persons include: Sergei Shoigu (Russian Defence Minister); Anton Vaino (Chief of Staff of the Presidential Executive Office); Marat Khusnullin (Deputy Prime Minister of Russia for Construction and Regional Development); Dmitriy Yuryevich Grigorenko (Deputy Prime Minister of Russia and Chief of the Government Staff of Russia); Maxim Gennadyevich Reshetnikov (Minister of Economic Development of Russia); Nikolay Anatolyevich Yevmenov; Vladimir Lvovich Kasatonov; Igor Vladimirovich Osipov; Army General Oleg Leonydovych Salyukov; Army General Sergei Surovikin; Lieutenant General Sergey Vladimirovich Dronov; Violetta Prigozhina; Lyubov Valentinovna Prigozhina; Denis Aleksandrovich Bortnikov; Andrei Leonidovich Kostin; Igor Ivanovich Shuvalov; Margarita Simonyan; Maria Zakharova; Vladimir Roudolfovitch Soloviev; Konstantin Knyrik; Aleksey Konstantinovich Pushkov; and Pyotr Tolstoy.

3 Listed entities include: Internet Research Agency, Bank Rossiya, PROMSVYAZBANK, VEB.RF.

4 See Council Decision (CFSP) 2022/265 & Council Implementing Regulation (EU) 2022/260, which designate 22 persons, including members of government, senior military personnel, people working for "pro-Russian" media and businesspeople, and 4 entities.

5 Council Decision (CFSP) 2022/264 & Council Regulation (EU) 2022/262

6 IS Bank, Rossiya Bank, PJSC Promsvyazbank, JSC Genbank, and JSC Black Sea Bank Development and Reconstruction.

7 Gennadiy Timchenko; Boris Rotenberg; and Igor Rotenberg

8 See S.I. 2019/855.

9 See OFSI Notice from February 24, 2022.

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