Summary briefing from the Department of Business, Innovation & Skills issued on the 22nd December 2014.

The European Union (EU) sanctions were implemented in response to Russia’s illegal annexation of Crimea and interventionist policies in eastern Ukraine and have been closely coordinated with a wide range of international partners. On 29 July 2014, the EU agreed to a significant package of measures to deter further de-stablisation of Ukraine by Russia and they came into force on 1 August 2014. On the 5th September 2014, the EU agreed to build on this existing package and the extended measures came into force on 12 September 2014. The EU sanctions fall into 3 main areas:

  • financial sanctions against designated Russian banks, energy companies and defence companies
  • arms embargo and restrictions on certain dual purpose technologies, which although intended for civilian use, might have military application
  • restrictions on exports of high tech goods and services in the energy sector

These sanctions were further revised on 4 December 2014 via Council Decision 2014/842/CFSP and Council Regulation (EU) No 1290/2014 2014 (coming into force on 6 December 2014) and these measures clarified the scope and application of certain provisions as follows:

Financial sanctions

These prevent 5 state owned Russian banks and their subsidiaries accessing EU primary and secondary capital markets. This means that these banks will be unable to purchase, sell, or receive brokering for new transferable securities. These include bonds, shares and money market instruments, such as treasury bills.

The EU has also prevented these targeted banks from accessing loans, another way to limit their access to financing. It has also limited their access to short-term financing by only permitting financing with a maturity of 30 days or less.

The package also extends these financial sanctions to other sectors; 3 entities in the oil sector and 3 defence companies now also have major restrictions on access to the EU’s capital and debt markets.

Arms and ‘dual-technology’

There is an arms embargo and a ban on the supply of dual-use goods to Russia for military end-users and for certain other named end-users in Russia. There is also a ban on the provision of technical or financial assistance for supply or sale of these goods. The UK interprets the arms embargo to apply to all goods and technology on the so called ‘Military List’. The restrictions on dual-use do not apply to goods and technology intended for the:

  • aeronautics and space industry
  • maintenance and safety of existing civil nuclear capabilities within the EU.

Energy high tech goods

There are restrictions on the export of certain high-tech goods and associated services to Russia for:

  • deep water oil exploration and production
  • arctic oil exploration and production
  • shale oil projects

Asset bans and travel freezes

132 individuals and 28 entities have now been listed under sanctions applied in response to violations of Ukraine’s sovereignty and are available from HM Treasury. The sanctions apply to all funds and economic resources belonging to, owned, held or controlled by those persons, entities or bodies listed.

Other measures

The 16 July 2014 European Council agreed to:

  • suspend the financing of new projects in Russia by the European Investment Bank (EIB)
  • coordinate EU member states’ positions within the European Bank for Reconstruction and Development (EBRD) with a view to suspension of the EBRD’s financing of new projects in Russia
  • suspend, on a case-by-case basis, certain EU bilateral and regional cooperation programmes with Russia

Russian ban on imports of agricultural products

On 7 August, the Russian government imposed a year-long ban on a number of agricultural commodities and further advice on this can be sourced via DEFRA.

Doing business in Crimea

The UK government has maintained a strict policy of non-recognition with respect to Crimea / Sevastopol, in line with UN General Assembly Resolution 68/262. UK businesses should be mindful of the increased commercial risks created by this situation and in particular EU members have agreed to:

  • prohibit the import of goods originating from Crimea and Sevastopol with the exception of those with certificates of origin granted by the government of Ukraine
  • prohibit direct or indirect financing, or financial assistance for the import of goods from Crimea and Sevastopol, as well as insurance and reinsurance related to such imports

In addition the EU Council agreed on 29 July 2014 to impose measures relating to the illegal annexation of Crimea. These measures imposed on EU citizens and businesses:

  • restrict investment in and export to Crimea
  • call on international financial institutions to refrain from financing any projects that explicitly or implicitly recognise the illegal annexation of Crimea and Sevastopol
  • ban investment in enterprises established in Crimea or Sevastopol engaged in the creation, acquisition or development of transport, telecommunications, energy infrastructure
  • ban the supply of certain equipment, technology and technical assistance, or investment, for oil, gas or mineral resources activity in Crimea or Sevastopol
  • apply to all new investments and not to existing investments or commitments in existing contracts until 28 October 2014

On 18 December 2014, the EU also imposed substantial additional sanctions on investment, services and trade with Crimea and Sevastopol and the new measures introduced the following amendments:

  • a ban on acquiring real estate in Crimea or Sevastopol
  • a ban on providing services related to tourism activities, including in the maritime sector, in Crimea or Sevastopol
  • a ban on providing technical, brokering, construction, or engineering services directly relating to infrastructure in Crimea and Sevastopol
  • an extension of the existing ban on joint ventures and investment financing to cover any entity from Crimea or Sevastopol
  • an extension and revision of the list of goods banned for supply to Crimea or Sevastopol and for which the provision of brokering, technical or financial services is banned