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EU economic sanctions against Russia

29/09/2014

On 12 September 2014 a new set of EU sanctions against Russia came into force. These had already been agreed upon by the 28 EU Member States on 8 September 2014, but official publication of Regulation 959/2014, Regulation 960/2014, and implementing Regulation 961/2014 (the “Regulations”) was postponed. The Regulations have their legal basis in the concurrent publication of Council Decisions 2014/658/CFSP and 2014/659/CFSP.The new sanctions package renders it more difficult for the largest energy and defence companies of Russia to gain access the European financial market. Sanctions in the field of petroleum technology, and restrictions on the export of dual-use goods have also been expanded. Another 24 people were added to the travel ban and asset freeze list. We summarise below the main characteristics of these newly-imposed sanctions.

Sanctions on individuals and entities

Following Council Decision 2014/685/CFSP and implementing Regulation 961/2014, a further 24 individuals have been included in the sanctions list of Regulation 269/2014 of 17 March 2014. All funds and economic resources belonging to these individuals have therefore been frozen, and travel bans have been imposed. Providing the listed individuals with funds or economic resources through direct or indirect means is also prohibited. Amongst the sanctioned people are prominent separatist leaders, high-ranking Russian politicians, Russian oligarchs, and political officials, particularly those from the Crimean government and the Donetsk People's Republic. The criteria for adding an individual or an entity to the list have been expanded. Regulation 959/2014 now allows all people or companies who entertain transactions or other business relationships with the separatist groups in the Donetsk Region of Ukraine to be included. The total currently stands at 141 sanctioned individuals and 23 sanctioned entities.

Sector-related sanctions

The new sanctions package renders it more difficult for the largest energy and defence companies of Russia to gain access the European financial market. Prohibitions have also been imposed in the area of oil production services, and restrictions on the export of dual-use items have been extended. The publication of Regulation 960/2014 brought these measures into force. Regulation 960/2014 modifies Regulation 833/2014, the regulation that first introduced the sector-related economic sanctions on 1 August 2014, in various ways. The primary changes are set out below.

The financial sector

Regulation 833/2014 imposes restrictions on long-term financing on five Russian credit institutions – Sberbank, VTB Bank, Gazprombank, Vnesheconombank (VEB) and Rosselkhozbank. The sale, purchase, or trade in any transferable securities and money market instruments with a maturity of more than 90 days issued by one of the banks listed is currently prohibited. Regulation 960/2014 expands these restrictions by adding the largest energy companies in Russia as well as three defence companies to the sanctions list. Bonds of Rosneft, Transneft and Gazprom Neft may no longer be traded on European capital markets. The same applies to helicopter producer Oboronprom, fighter plane manufacturer United Aircraft Corporation, and tank manufacturer Uralvagonzavod. The prohibition applies to all companies listed as of 12 September 2014, and covers securities and money market instruments that are of the type mentioned above, and which have a maturity of more than 30 days. Loans with a maturity of more than 30 days are also covered, contrary to previous Regulations. The prohibitions apply to loans that are agreed upon after 12 September 2014.

Dual-use goods

Up until the enactment of Regulation 960/2014, the supply prohibition covered only dual-use goods with a military purpose. However, Annex IV of the new Regulation contains a list of nine companies to whom supply of dual-use goods is strictly forbidden, regardless of whether the intended use is civilian or military. The listed companies are JSC Sirius, OJSC Stankoinstrument, OAO JSC Chemcomposite, JSC Kalashnikov, JSC Tula Arms Plant, NPK Technologii Maschinostrojenija, OAO Wysokototschnye Kompleksi, OAO Almaz Antey and OAO NPO Bazalt.

The oil industry

Under Regulation 833/2014, delivery of capital equipment for oil production without proper authorisation is prohibited. Regulation 960/2014 now also prohibits the provision of services needed for deep sea oil exploration and production, Arctic oil exploration and production, and for production of shale oil. This covers services such as drilling and the delivery of floating platforms.

Authors

Heidemann Thomas
Dr. Thomas Heidemann
Partner
Moscow