Ukraine/Russia – Sanctions Update of 2 March

2 March 2022

Further to our previous news alert of 24 February regarding the situation in Ukraine generally and the sanctions imposed upon Russia (click here), the following additional sanctions have been introduced:

US Sanctions
• Further Russian banks have been sanctioned:
- Otkritie and Novikombank (and their subsidiaries worldwide), and
- VTB Bank PJSC (VTB), Russia's second-largest bank, and 20 of its subsidiaries
• US lawyers Holland & Knight LLP have commented that “Any entities owned 50 percent or more, directly or indirectly, by these or other SDNs are also subject to full U.S. blocking sanctions, even if the entities do not formally appear on the SDN List… Non-U.S. persons are also prohibited from engaging in transactions or other business dealings involving the banks if those activities have a direct or indirect nexus with the United States or U.S. persons. Non-U.S. financial institutions and companies could also be subject to secondary sanctions, including potentially being added to the SDN List themselves, if they conduct a “significant” transaction with either institution following the imposition of sanctions.”
• Further and pursuant to Directive 3 under Executive Order 14024, US OFAC expanded Russia related debt and equity restrictions to additional companies critical to the Russian economy (prohibiting transactions and dealings by US persons or within the US in new debt of longer than 14 days maturity and new equity).

EU Sanctions (as reported by EU Press Release)

Individual sanctions
• In addition to freezing the assets of the Russian President and Minister of Foreign Affairs, the EU will impose restrictive measures on members of the National Security Council of the Russian Federation who supported Russia’s immediate recognition of the two non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine as independent entities. Sanctions will also be extended to the remaining members of the Russian State Duma, who ratified the government decision of the Treaty of Friendship, Cooperation and Mutual Assistance between the Russian Federation and the two entities.
• The EU will also target those individuals who facilitated Russian military aggression from Belarus.

Financial sanctions
• The package adopted further expands the existing financial restrictions, thereby cutting Russian access to the most important capital markets. It also prohibits the listing and provision of services in relation to shares of Russian state-owned entities on EU trading venues. In addition, it introduces new measures which significantly limit the financial inflows from Russia to the EU, by prohibiting the acceptance of deposits exceeding certain values from Russian nationals or residents, the holding of accounts of Russian clients by the EU Central Securities Depositories, as well as the selling of euro-denominated securities to Russian clients.
• These sanctions will target 70% of the Russian banking market, and key state-owned companies, including in the field of defence.

Energy sector
• The EU will prohibit the sale, supply, transfer or export to Russia of specific goods and technologies in oil refining, and will introduce restrictions on the provision of related services.
• By introducing such export ban, the EU intends to hit the Russian oil sector, and make it impossible for Russia to upgrade its oil refineries.
• Russia's export revenues accounted for EUR 24 billion in 2019.

Transport sector
• The EU introduced an export ban covering goods and technology in the aviation and space industry, as well as a prohibition on the provision of insurance and reinsurance and maintenance services related to those goods and technology. The EU will also prohibit the provision of related technical and financial assistance.
• This ban on the sale of all aircrafts, spare parts and equipment to Russian airlines will degrade one of the key sectors of Russia's economy and the country's connectivity, as three quarters of Russia's current commercial air fleet were built in the EU, the US and Canada.

Technology sector
The EU has imposed further restrictions on exports of dual-use goods and technology, as well as restrictions on exports of certain goods and technology which might contribute to Russia’s technological enhancement of its defence and security sector. This will include products such as semiconductors or cutting-edge technologies.

UK Sanctions
• Additional companies and financial institutions have been added to the sanctions list
• New restrictions on trade and export controls against Russia’s hi-tech and strategic industries have been announced:
(a) All dual-use export licences to cover components which can be used for military purposes have been suspended with immediate effect and
(b) The United Kingdom will stop exports of high-tech items and oil refinery equipment in the next few days
• Russia’s national airline Aeroflot has been banned from UK airspace

This is a fast developing situation and there may be other sanctions and details that we have not mentioned and/or are not yet available. Further News Alerts will follow on further sanctions that are implemented.