March, 2022 - EU sanctions on Russia
- Date: 11/03/2022
On 24th February, 2022, the European Union put into place a wide range of measures in response to the conflict in Ukraine. These measures can be found in Regulation 2022/328.
The EU has continued to add to its sanctions regime in light of the ongoing war, and as the situation in Ukraine is constantly developing, the sanctions position has been changing frequently. As such, Members are encouraged to carry out thorough due diligence in respect of their contractual counterparties and commercial arrangements.
The purpose of this article is to summarise those measures which may have a particular potential impact on Members.
Blocking sanctions have been imposed on individuals and entities including:
- Bank Rossiya;
- VEB.RF (Vnesheconombank);
- Individuals involved in the decision to claim the non-government controlled areas of Donetsk (DNR) and Luhansk (LNR) including 351 members of Russia’s parliament and 27 high profile individuals and entities; and
- Russian President Vladimir Putin, Minister of Foreign Affairs Sergei Lavro and a number of Russian oligarchs.
Financial Sanctions and Restrictions
A number of financial sanctions have been imposed, including the following prohibitions:
- A prohibition of the sale and supply, transfer or export of euro banknotes to Russia or to any person/entity in Russia (including the Government of Russia) or for use in Russia.
- A prohibition on investing, participating or contributing to projects co-financed by the Russian Direct Investment Fund unless the relevant contracts were concluded before 2nd March, 2022.
- A prohibition on the acceptance of any deposit from Russian nationals or persons residing in Russia or legal bodies established in Russia exceeding €100,000, with certain exceptions.
There is also a prohibition on certain investment services, transferable securities and loans with various Russian financial institutions, subject to certain exceptions. More particularly:
- As regards the Government of Russia, the Russian Central Bank or entities/bodies acting on its behalf or at its direction, it is prohibited to:
- Purchase, sell, or otherwise deal with transferable securities and money-market instruments issued after 9th March, 2022 by them; or
- Make or be part of arrangements creating new loans or credit after 23rd February, 2022.
- Of particular concern to the shipping sector, it is prohibited to supply investment services connected with transferable securities and money market instruments after 12th April, 2022, as well as new loans or credit after 26th February, to entities including:
- Novorossiysk Commercial Sea Port
- United Shipbuilding Corporation.
Members should note that it appears these measures do not preclude all engagement with these parties. In particular, the restrictions do not prevent ships calling at ports and terminals operated by Novorossiysk Commercial Port, or the payment of port fees and dues for doing so.
The EU (in consultation with the UK, US and Canada) has also requested that SWIFT disconnect a number of Russian banks from its system. Pursuant to Council Decision (CRFSP) 2022/346 and Council Regulation (EU) 2022/345, from 12th March, 2022 it will be prohibited to provide SWIFT services to the following Russian banks:
- Bank Otkritie;
- Rossiya Bank;
- VNECHECONOMBANK (VEB); and
- VTB Bank.
The SWIFT restrictions also apply to any entity established in Russia and owned (directly or indirectly) by more than 50% by one of the above entities.
EU Regulation 2022/328 prohibits the sale, supply, transfer or export, and/or any related technical or financial assistance, in respect of:
- Dual use goods and technology to any natural or legal person, entity or body in Russia or for use in Russia;
- Certain listed goods or technology which “might contribute to Russia’s military and technological enhancement or the development of the defence and security sector”;
- Certain listed goods or technology for use in oil refining; and
- Certain listed goods or technology suited for use in aviation or the space industry, including the repair or modification of such goods.
Pursuant to Regulation 2022/328, there is an airspace ban on any aircraft operated by Russian air carriers, or for any Russian registered aircraft, or for any non-Russian registered aircraft owned, chartered or controlled by a Russian entity or person, to land in, take off from or fly over the EU.
Sectoral Sanctions - Donetsk (DNR) and Luhansk (LNR)
There are also sectoral sanctions in place regarding the non-government controlled areas of Donetsk and Luhansk, (see Council Decision (CFSP) 2022/266 and Council Regulation (EU) 2022/263) including:
- a ban on the import of goods originating in the Donetsk (DNR) and Luhansk (LNR) regions of Ukraine into the EU, and any related financing or insurance in respect of the same;
- restrictions on investment in the regions; and
- an export ban for a wide range of goods and technologies (mainly aimed at the transport, telecommunications, energy, oil, gas and minerals sectors).
Members are reminded that EU sanctions apply to all EU nationals, including any entities incorporated under the law of an EU member state, regardless of where they are doing business. They also apply to all business done by EU and non-EU persons in whole or in part within EU territory, including its airspace or on any aircraft or vessel under an EU member state’s jurisdiction.
Many of the above provisions also include prohibitions against the provision or insurance or reinsurance for any sanctioned activities. As such, Members are encouraged to check the position with their P&I and/or Defence Clubs before engaging in any trade which involves Russia.
As always, if Members have any questions in relation to the above issues they are invited to contact the Club for further information.