US, EU And UK Maintain Pressure Through Russia Sanctions

This client publication is a restatement of our previous client notes and related materials dated August 10, 2022^[1] , April 27, 2022^[2] and March 22, 2022.^[3] It tracks the most significant sanctions emerging from the U.S., EU and U.K. as they stand at September 18, 2023, including updates since our last cumulative publication, US, EU And UK Increase Pressure on Russia with Further Sanctions. In addition, it annexes a table of key individuals and entities named as being subject to the U.S., EU and U.K. sanctions. The table has been updated since the August 10, 2022 publication, to reflect some key additions to the sanctions lists.

As a reaction to these sanctions, the Russian government has announced a number of retaliatory sanctions, including foreign currency restrictions and measures targeting foreign businesses in Russia.

Prior to Russia’s invasion of Ukraine, named Russian persons and businesses were already subject to wide-ranging international sanctions, linked to Russia’s annexation of Crimea in 2014 and other events. Since February 2022, increasingly intensive rounds of international sanctions have been imposed as the conflict in Ukraine has escalated.

Many jurisdictions issued a new round of sanctions, export controls and trade restrictions on Russia, in coordination with allies and G7 partners, to mark the one-year anniversary of the ongoing conflict in Ukraine. The EU has now frozen €21.5 billion of assets belonging to designated individuals and entities, while €300 billion of assets from the Central Bank of Russia have been blocked in the EU and G7 countries.^[4] The U.K. applies similar asset freezes and has sanctioned over 1,500 Russian individuals and entities. U.K. trade sanctions have resulted in a 99% reduction in imports from Russia since before the invasion.^[5] The U.S. has sanctioned Russia’s ten largest financial institutions, and a U.S.-backed task force has frozen over $58 billion in assets. The U.S., EU and U.K. have each implemented price caps on Russian-origin oil and petroleum products, expanded their sanctions targeting Russia’s military-industrial complex, including targeting PMC Wagner as a significant transnational criminal organization, and continued to target third-country individuals and companies of key weapons and technology inputs to Russia or those deemed to have assisted in sanctions evasion. Nevertheless, the Russian offensive continues, and we continue to advise our clients on the implications of these measures and track these developments as the war evolves.

Global sanctions range from directly targeting the assets of Russian financial institutions, online media outlets linked to the Russian government disinformation campaign, corporations and individuals to extending restrictions on certain categories of transactions, investments or trade with Russia. Western sanctions on Russian energy products, including export bans and prohibitions on the financing of energy exports, are the most far-reaching sectoral sanctions imposed on a single nation in recent years in the absence of country-wide sanctions. The G7’s Price Cap Coalition has agreed a $60 per barrel cap on companies shipping Russian crude oil to third countries, effective from December 5, 2022, which was extended on February 5, 2023, to other products ($100 for high-value products like diesel and $45 for lower-value products like fuel oil). A total of ten Russian entities (together with their designated Russia-based subsidiaries) and four Belarusian entities have now been removed from the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Trade controls by the EU and U.K. on imports and exports of certain categories of goods and a comprehensive trade and investment embargo against the self-proclaimed Donetsk and Luhansk People’s Republics have been renewed and extended to Russian-controlled parts of Kherson and Zaporizhzhia, over which Russia has now taken control. Similarly, the U.S. has imposed comprehensive sanctions on the so-called Donetsk and Luhansk People’s Republics. Several countries have announced restrictions on Russian flights in their airspace and limited Russia’s access to aviation equipment and many have implemented travel bans on sanctioned individuals. Many jurisdictions have also targeted Belarusian and, more recently, Iranian individuals and entities and/or trade with Belarus and Iran in response to the support those countries have shown for the Russian campaign against Ukraine.

Key Takeaways

• The sanctions related to Russia’s invasion of Ukraine are multi-faceted and, at times, complex and far-reaching, with potential implications for any business operating in the global economy, even those with no immediate or direct ties to Russia, Belarus or Ukraine.

• Corporates and financial institutions should continue to monitor the situation and conduct and update risk assessments to determine if and how these sanctions may impact their operations and business relationships. Businesses and individuals with any links to Russia, Belarus or Ukraine should develop and maintain a list identifying their connections with these countries and make any necessary adjustments to ensure compliance with applicable sanctions. They should also continue to monitor ties to these jurisdictions and be vigilant as new sanctions are introduced or developed.

• Any necessary corrective action should be taken in time to meet applicable deadlines or permissible wind-down measures. Companies should review and update their compliance policies and procedures to effectively mitigate against new sanctions, AML and anti-corruption risks.

• Legal advice should be sought in complex cases as the impact of these sanctions is unavoidably a fact-specific inquiry and will be dependent on the specific details of the transactions and circumstances in question. These sanctions as a whole contain few generally applicable rules and do not necessarily apply in the same way or to the same entities in each jurisdiction.

US Sanctions

The U.S. sanctions regime consists of a number of sanctions programs with a combination of comprehensive, sectoral, targeted and secondary sanctions. The sanctions program related to Russia and Ukraine is implemented primarily by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)—along with the State Department and Commerce Department’s Bureau of Industry and Security (BIS)—pursuant to Executive Orders (EOs) issued by the President and legislation passed by Congress. OFAC has laid out additional measures in response to the Russian invasion of Ukraine in a series of new directives and determinations with certain wind-down periods and exceptions authorized through general licenses.

The U.S. sanctions regime is binding on all U.S. persons, including all U.S. citizens and permanent resident aliens regardless of their location, all persons and entities within the United States and all U.S.-incorporated entities and their foreign branches. Non-U.S. persons may also be exposed to secondary sanctions risk if they transact with individuals or entities subject to sanctions—including, if they materially assist, sponsor or provide financial, material or technological support for, or goods or services to or in support of, certain activities, a person whose property and interests in property are blocked. Non-U.S. persons may also expose themselves to liability if they “cause” a violation of U.S. sanctions by unlawfully introducing some U.S. nexus to a prohibited transaction. Violations of U.S. sanctions can lead to significant criminal or civil penalties.

The table annexed to this note lists key entities and individuals named as being subject to U.S. (as well as EU and U.K.) sanctions.

The U.S. sanctions implemented in response to Russia’s invasion of Ukraine as of September 18, 2023, include:

• Specially Designated Nationals (SDNs) designations. The U.S. administers blocking sanctions through the publication of a list of Specially Designated Nationals and Blocked Persons with whom transactions are prohibited. U.S. persons are prohibited from all direct and indirect dealings with SDNs and must block (i.e., freeze) any property in their possession in which such individuals or entities have any interest. Additionally, individuals on the SDN list are subject to travel restrictions. U.S. designations include, among others:

• Individuals and entities operating in, or relevant to, Russia’s metals and mining sector or current and future energy needs (including research institutes where new extraction technologies are developed, companies that facilitate drilling and mining operations, and firms that attract and advise on investment in Russia’s energy industry, such as The Fund for Development of Energy Complex Energy);
• Defense and war-related enterprises;
• Russian wealth management and financial services (including major Russian financial institutions);
• Russian government officials, including President Vladimir Putin, Foreign Minister Sergei Lavrov, Defense Minister Sergei Shoigu, Kremlin Press Secretary Dmitry Peskov, and members of the State Duma;
• Russian business and political elites;
• Russian-backed media companies; and
• Russian darknet market and virtual currency exchanges.

• Comprehensive Embargo on the DNR and LNR. These sanctions are similar to the 2014 sanctions imposed on the Crimea region following Russia’s incursions there and effectively prohibit nearly all U.S.-nexus trade with the DNR and LNR, along with any other regions of Ukraine that may be later added by the Secretary of the Treasury, in consultation with the Secretary of State (the “Covered Regions”). The sanctions under EO 14065 prohibit (1) new investment by a U.S. person in the Covered Regions, (2) the import into the U.S. of any goods, services or technology from the Covered Regions, (3) the export from the U.S. or by a U.S. person of any goods, services or technology to the Covered Regions and (4) U.S. persons from financing, facilitating or guaranteeing transactions that U.S. persons would be prohibited from engaging in directly.

• Trade & Investment restrictions. In addition to the comprehensive trade embargo in place on the DNR and LNR, the U.S. has imposed a series of new trade restrictions and investment bans on numerous segments of the Russian economy:

• Oil and gas. Issued on March 8, 2022, EO 14066 banned the import of Russian-origin oil, liquified natural gas and coal into the United States. In April, U.S. President Biden also signed into law the Ending Importation of Russian Oil Act, which codified the prior ban on Russian oil, gas and coal imports. OFAC has confirmed that, to the extent imports of Russian-origin oil, gas and coal outside of the U.S. do not involve a sanctioned person or otherwise prohibited transaction, non-U.S. persons would not be subject to U.S. sanctions if they continue to import these products to non-U.S. jurisdictions. BIS also extended existing export control restrictions—initially imposed in 2014 in response to the Russian annexation of Crimea—that target Russia’s access to oil and gas refinery equipment. Restrictions on the provision of goods, technology and services (with the exception of financial services) by U.S. persons in support of specified energy projects (e.g., projects run by Lukoil, Gazprom and Rosneft) have been in place since 2014;
• High-tech goods. BIS has imposed restrictions on exports from the U.S. and on foreign items using U.S. equipment, software and blueprints to Russia of high-tech goods, including semiconductors, computers, telecommunications, information security equipment, lasers and sensors;
• Materials and Chemicals. BIS has listed as controlled items a variety of electronics, instruments and advanced fibers for the reinforcement of composite materials, and certain additional chemicals to the Export Administration Regulations;
• Luxury goods. Issued on March 11, 2022, EO 14068 prohibits the export of U.S.-origin luxury goods, including certain spirits, tobacco products, clothing items, jewelry, vehicles and antique goods into Russia;
• Seafood, diamonds and alcohol. Certain U.S. imports of Russian-origin seafood, non-industrial diamonds, alcohol and any other products later designated are prohibited pursuant to EO 14068;
• U.S. banknotes. Exports from the U.S. into Russia of U.S. banknotes are prohibited pursuant to EO 14068.
• Russian gold. On May 24, 2022, the U.S. prohibited the importation of Russian gold, the country’s largest non-energy export, pursuant to a determination under E.O. 14068. Even prior to this new determination, certain gold-related transactions designed to circumvent regulations were sanctionable under U.S. sanctions authorities.

• Suspension of Normal Trade Relations. Following the signing by President Biden of the Suspending Normal Trade Relations with Russia and Belarus Act, which denies most-favored nation tariff treatment to Russian and Belarussian products. The United States Trade Representative announced additional tariff increases, including on most Russian-origin metal and mining products, doubling them from 35% to 70%, and certain additional Russian productions to 35%, including chemicals and minerals. These actions are complemented by the 200% tariff imposed on Russian aluminum implemented between March – April 2023, pursuant to Section 232 of the Trade Expansion Act of 1962, as amended.

• Ban on new investment and certain services. Issued on April 6, 2022, EO 14071 prohibits all “new investment” in the Russian Federation by U.S. persons, wherever located, as well as the direct or indirect provision by U.S. persons of any category of services determined by the Secretary of the Treasury, including:

• Provision of accounting, trust and corporate formation and management consulting services. Issued on May 8, 2022, U.S. persons are prohibited from providing certain accounting, trust and corporate formation and management consulting services to any person located in the Russian Federation pursuant to a determination under E.O. 14071.
• Provision of architecture or engineering services. As of June 18, 2023, U.S. persons are prohibited from the export, re-export, sale or supply of architecture services or engineering services to any person located in the Russian Federation pursuant to a determination under E.O. 14071.
• Provision of quantum computing services. Issued on September 15, 2022, U.S. persons are prohibited from providing quantum computing services to any person located in Russia pursuant to a determination under E.O. 14071.
• Provision of maritime transport of crude oil. Issued on November 21, 2022, U.S. persons are prohibited from providing certain services, including trading or commodities brokering, financing, shipping, flagging or customs brokering, to any person located in Russia as they relate to the maritime transport of crude oil pursuant to a determination under E.O. 14071, unless the crude oil is at or below the price cap of $60 per barrel. The price cap became effective on December 5, 2022.
• Provision of maritime transport of petroleum products. As of February 5, 2023, U.S. persons are prohibited from providing certain services, including, trading or commodities brokering, financing, shipping, flagging or customs brokering, to any person located in Russia as they relate to the maritime transport of petroleum products pursuant to a determination under E.O. 14071, unless such products are at or below the price cap of $45 per barrel on Discount to Crude petroleum products and $100 per barrel on Premium to Crude petroleum products.

• Sectoral sanctions.

• Architecture, Engineering, Construction, Manufacturing and Transportation Sanctions. A sectoral determination pursuant to E.O. 14024 authorized the imposition of sanctions on individuals or entities determined to be operating or having operated in the architecture, engineering, construction, manufacturing and transportation sectors of the Russian economy.
• Metals and Mining Sectoral Sanctions. A sectoral determination pursuant to E.O. 14024 authorized the imposition of sanctions on individuals or entities determined to be operating in the metals and mining sector of the Russian economy.
• Quantum Computing. On September 15, 2022, a sectoral determination pursuant to E.O. 14024 authorized the imposition of sanctions on individuals or entities determined to be operating in the quantum computing sector of the Russian economy.
• Financial services sector. A sectoral determination pursuant to E.O. 14024 authorized the imposition of sanctions on individuals or entities determined to be operating in the financial services sector of the Russian economy.
• Aerospace, electronics, and marine sectors. On March 31, 2022, a determination pursuant to EO 14024 authorized the imposition of blocking sanctions on persons determined to be operating in the aerospace, electronics and marine sectors of the Russian economy.
• Accounting, trust and corporate formation and management consulting services sectors. A sectoral determination pursuant to E.O. 14024 authorizes the imposition of sanctions on individuals and entities that operate or have operated in the accounting, trust and corporate formation services or management consulting sectors of the Russian economy.

• Financial restrictions.

• Russian sovereign debt restrictions. Directive 1A under EO 14024 prohibits U.S. financial institutions from dealing in the secondary market for new ruble or non-ruble denominated bonds issued by Russia’s Central Bank, National Wealth Fund and Ministry of Finance. While U.S. financial institutions were previously banned from participation in the primary market for new debt issued by these entities, the restrictions now apply to secondary market trading activities for bonds issued after March 1, 2022;
• Correspondent and payable-through account restrictions. Directive 2 under EO 14024 imposes correspondent and payable-through account restrictions (CAPTA) restrictions on the Public Joint Stock Company Sberbank of Russia and its foreign financial institution subsidiaries (listed in Annex 1 to the Russia-related CAPTA Directive). These sanctions required U.S. financial institutions to close, before March 26, 2022, any correspondent and payable-through accounts and reject future transactions involving Sberbank and its subsidiaries;
• New debt and equity restrictions. Similar to previous Directives imposing sectoral sanctions related to Ukraine, Directive 3 under EO 14024 prohibits U.S. persons from all transactions in, provisions of financing for, and other dealings in new debt of longer than 14 days maturity and new equity issued by listed entities on or after March 26, 2022. OFAC may also add additional entities under Directive 3. Newly added entities will be subject to prohibitions on new debt and equity 30 days after OFAC makes its determinations; and
• Restrictions on transactions with Russia’s Central Bank, National Wealth Fund and Finance Ministry. Directive 4 under EO 14024 prohibits U.S. persons from engaging in any transactions involving Russia’s Central Bank, National Wealth Fund and Ministry of Finance, including any transfer of assets to or foreign exchange transaction for or on behalf of these entities. Directive 4 was implemented in accordance with the joint announcement on February 26, 2022, with the European Commission, France, Germany, Italy, the U.K. and Canada. The effective result is that any assets of these entities that are held in U.S. financial institutions are immediately frozen, and financial institutions outside the U.S. that hold U.S. dollars for these entities are unable to disburse those funds.

• Airspace restrictions. On March 1, 2022, the U.S. announced that it would block all Russian aircraft and airlines from entering U.S. airspace. The move came after Europe and Canada imposed similar restrictions.

• Travel and visa restrictions. Visa restrictions have been placed on thousands of members of Russia’s military and certain members of the Belarusian military. The U.S. Department of State has also designated Russian military, defense and government officials for their involvement in serious human rights abuse.

The U.S. has also imposed sanctions on Belarus for its role in supporting the Russian invasion. BIS imposed restrictions, similar to those placed on Russia, on certain exports to Belarus, including oil and gas production, commercial and industrial items, and chemical and biological precursors, along with high-tech goods and luxury goods. OFAC also designated several Belarusian individuals for their support of the Russian invasion of Ukraine. In February 2023, BIS also imposed new export control measures on Iran to address the use of Iranian Unmanned Aerial Vehicles (UAVs) by Russia, by imposing license requirements for a subset of generally low-technology items, including semiconductors, that are destined for Iran, regardless of whether a U.S. person is involved in the transaction.

In addition to new sanctions, OFAC has issued a number of general licenses that authorize transactions otherwise prohibited by U.S. sanctions. These include wind-down periods for some restrictions and exceptions for certain categories of transactions or with certain individuals or entities. On June 23, 2023, OFAC and the U.K. Office of Financial Sanctions Implementation (OFSI), released a joint fact sheet on humanitarian assistance and food security, which provides an overview of the applicable authorizations and exemptions for those engaged in agricultural trade or the provision of medical supplies and assistance.^[6] This updates OFAC’s April 19, 2022, fact sheet on the applicable authorizations and exemptions for agricultural trade, access to communications, and other support to those impacted by the war in Ukraine.

U.S. officials have underscored their commitment to enforce U.S. sanctions imposed in response to Russia’s invasion of Ukraine. Announced on March 2, 2022, the KleptoCapture Task Force is an interagency task force dedicated to enforcement of the U.S. measures imposed in response to Russia’s invasion of Ukraine, including sanctions, export restrictions and economic countermeasures. Another initiative launched in March—the Russian Elites, Proxies and Oligarchs (REPO) Task Force—is a multilateral partnership between the U.S. and its allies in Australia, Canada, Germany, France, Italy, Japan, the U.K. and the European Commission to target the assets of Russian oligarchs to inflict maximum pain on those close to the Putin regime. As of March 9, 2023, the REPO Task Force has blocked more than $58 billion worth of sanctioned Russian assets in financial accounts and economic resources, immobilized about $300 billion worth of Russian Central Bank assets, seized yachts and luxury real estate and taken steps to restrict Russia’s access to the global financial system.

Additionally, over the past year, U.S. government agencies have issued three joint alerts highlighting common tactics used by illicit actors to evade Russia and Belarus-related sanctions and export controls.

• First, in June 2022, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and BIS issued a joint alert urging financial institutions to be vigilant against efforts by individuals or entities to evade BIS export controls implemented in connection with Russia’s invasion of Ukraine. The alert provided financial institutions with a list of commodities of concern for possible export control evasion and select transactional and behavioral red flags to assist financial institutions in identifying suspicious transactions relating to possible export control evasion.

• Second, in March 2023, BIS, OFAC and the Department of Justice issued a compliance note directed at financial institutions, which again identified common red flags that can indicate a third-party intermediary may be engaged in efforts to evade sanctions or export controls, identified best practices to ensure proper compliance with sanctions and export control restrictions, and highlighted certain recent civil and criminal enforcement actions.

• Third, in May 2023, FinCEN and BIS issued a supplemental alert reinforcing ongoing U.S. Government actions being taken to hinder Russia’s war efforts. The alert further details evasion typologies, additional transactional and behavioral red flags to assist financial institutions in identifying suspicious transactions relating to possible export control evasion and highlights nine high priority product items to inform best due diligence practices.

EU Sanctions

In the EU, decisions on the adoption of sanctions are taken by the Council of the European Union on the basis of proposals from the High Representative of the Union for Foreign Affairs & Security Policy. The High Representative together with the European Commission seek to give effect to these decisions by submitting joint proposals for Council regulations, which are then adopted by the Council. The Commission also oversees member-state implementation of EU sanctions regimes.

In addition, member states of the EU are permitted to introduce their own sanctions regimes against third countries. Several EU sanctions have involved or been presaged by similar actions by particular EU member states, notably those concerning the prohibition of Russian aircraft or the use of airspace. The SWIFT sanctions have also been imposed via groups of EU member states and other countries acting together.

Scope Of Sanctions

The territorial scope of the EU’s Russian sanctions is broad. The sanctions typically apply: (1) within the territory of the EU, including its airspace; (2) on board any aircraft or vessel under the jurisdiction of an EU member state; (3) to EU nationals, wherever they are located; (4) to any legal entity incorporated under the law of an EU member state, whether that entity is situated inside or outside the EU; and (5) to any legal entity in respect of business done in whole or in part within the EU.

Members of the European Parliament have unanimously voted that all sanctions against Russia should also be mirrored for Belarus, in light of its support for the Russian campaign against Ukraine. To this end, the EU further extended sanctions against Belarus in August 2023, including extending existing export bans to a range of goods, technologies, weapons and ammunition that may be used for military or technological purposes, or in the aviation or space industry. The EU has begun extending export bans to specific third-country entities believed to be supporting Russia’s war efforts, including entities in Iran, Armenia, Hong Kong, Syria, the United Arab Emirates and Uzbekistan. The European Council is now empowered to introduce restrictions on the sale of dual-use goods and technology (and other goods that might contribute to Russia’s military) to third countries that are shown to represent a particularly high risk of being used for the circumvention of sanctions. As at the date of publication of this note, no third countries have been targeted by such sanctions.

The table annexed to this note lists key entities and individuals named as being subject to EU (as well as U.S. and U.K.) sanctions.

Sanctions Measures

EU sanctions against Russia include the following categories of measures:

• Asset freezes, prohibiting the provision of funds or economic resources to sanctioned individuals (who are named in Annexes to Council Regulation (EU) No 269/2014). There is a delay between the announcement of new asset freeze targets in the EU Official Journal and the updating of consolidated Annexes in Council Regulation (EU) No 269/2014, so it is advisable also to track the EU Official Journal updates. The EU adds to the list of designated individuals and entities on an ongoing basis. Entities that are not themselves named as being subject to asset freeze sanctions under Council Regulation (EU) No 269/2014, but are owned or controlled by named entities, may effectively be subject to sanctions—the question of ownership or control should be assessed on a case-by-case basis. Similarly, entities who are listed as being “associated” with named entities under Council Regulation (EU) No 269/2014 are not themselves sanctioned, but the highest caution should be exercised when dealing with such persons or entities, as they may be captured by sanctions by virtue of their ownership or control. Further information can be found in the EU’s FAQs on Asset freeze and prohibition to provide funds or economic resources.

• Financial services restrictions: