Latest EU and UK trade sanctions against Russia and Belarus

EU introduces a fifth package of measures.

New asset freezes
On April 8, 2022, the EU published a fifth round of measures against Russia and Belarus. Spread across four regulations, the new measures include additional asset freezes against 217 individuals and 18 entities. Notable inclusions are Otkritie FC Bank, Novikombank, Sovcombank, VTB Bank, and JSC GTLK. The full list of new designations can be found in the Annex to Regulation (EU) 2022/581.

A wind down license is available for the termination of correspondent banking relationships with the newly frozen banks by October 9, 2022. A new ground for licensing has also been added so that member states may enable the sale by listed persons/entities of proprietary rights in EU companies, provided the proceeds of such sale and transfer remain frozen.

New financial and trade restrictions
The latest package of sanctions is divided into six key “pillars,” namely: (i) a ban on the import of coal; (ii) additional financial measures; (iii) transport restrictions; (iv) targeted export bans; (v) additional import bans; and (vi) clarifications and enforcement provisions relating to efforts to exclude Russia from public contracts offered in the EU.

Some notable implications of the new regulations are listed below. As with previous sanctions, there are various exemptions, licensing grounds, and wind-down provisions. The text of the new primary regulation (with all annexes referred to below) can be found here. Guidance on the new measures is to be published shortly.

• The current prohibition on the supply of aircraft and aircraft parts into Russia has been extended to now also prohibit jet fuel and fuel additives (as listed in the new Annex XX).

A new licensing ground has been added that allows member states to authorize the execution (i.e., continuation) of aircraft leases concluded before February 26, 2022, where: (i) it is necessary to ensure lease re-payments to a non-sanctioned EU entity and; (ii) no economic resources will be made available to the Russian counterparty except for the transfer of ownership of the aircraft after full reimbursement of the lease. This provision provides much needed relief for EU lessors whose aircraft may have been grounded in Russia, e.g., allowing buyout clauses to be explored.

• Port ban. It shall be prohibited from April 16, 2022 for Russian vessels to access EU ports. This ban extends to any vessel that has changed their Russian flag or registration to that of another country after February 24, 2022. The ban includes cargo ships and recreational crafts. Exemptions may apply, including where the ship is carrying gas, oil, nuclear fuel, aluminum, or other listed products into the EU.
• Import bans. A new Annex XXI has been added which lists goods that “generate significant revenues for Russia thereby enabling its actions destabilizing the situation in Ukraine.” The purchase or import of such goods is now prohibited, as is the import of coal and other fossil fuels. Such goods include certain cement products, hydrocarbons, fertilizers, wood, glass products, aluminum, turbojets, and vessels.
• Export bans. The list of goods which cannot be supplied to Russia has grown with new additions to existing export restriction lists and a new Annex XXIII list of “goods which could contribute in particular to the enhancement of Russian industrial capacities.” The goods are wide-ranging and include items ranging between plants, elements (including silicon), certain chemicals, photographic film, rubber, wood, paper, construction goods, iron and steel, appliances, rail locomotives and tracks, surveying equipment, and various other machines and components thereof.
• A new prohibition restricts road transport undertakings established in Russia from transporting goods by road within the EU. A comparable provision has also been imposed in respect of Belarussian undertakings.
• Financial restrictions. In addition to the current deposit limit of €100,000, it is now prohibited to provide cryptocurrency services (including a crypto-asset wallet) to Russian nationals and entities, or natural persons residing in Russia if the total value of assets exceeds €10,000. The Euro denominated banknote restriction has also been extended to cover all official currencies of the EU (for both Russia and Belarus).
• Public contracts. A new prohibition blocks the award or continued execution of certain public or concession contracts to Russian nationals and entities (or their subsidiaries), including where they account for more than 10% of the contract value. It is further prohibited to provide support under a European Atomic Energy Community programme or contract to a Russian entity with over 50% public ownership or control.
• Trust services. New restrictions apply to the provision of a registered office, business or administrative address, or management services or to act as a trustee, nominee shareholder, director, secretary or a similar position to a trust or any similar legal arrangement having as a trustor or a beneficiary that is a Russian national, entity, or subsidiary.

Recap of the EU’s fourth package of measures
The EU’s fourth package of measures was introduced on March 15, 2022. In particular, the fourth package implemented the following restrictions (subject to wind down periods in some cases)

• Extended restrictions on exporting equipment and technology used in the energy industry (not including equipment and technology needed to transport fossil fuels through Russia into the EU).
• Investment bans on Russian entities involved in the energy sector, (again, subject to a licensing provision to the extent the activity is necessary to, among other things, ensure critical energy supply to the EU).
• Import bans on iron and steel products as listed in an Annex to the amending regulation if they originate in Russia or have been exported from Russia.
• Export bans on “luxury goods” as listed in an Annex to the amending regulation.
• Prohibited transactions with publicly owned companies as listed in an Annex to the amending regulation unless they are strictly necessary for the purchase or import of fossil fuels, aluminum, iron ore, or other listed goods into the EU.
• Prohibited the provision of credit rating services to Russian nationals and entities.

UK developments
On April 8, 2022, the UK announced that it would ban all new UK outward investment into Russia, end all imports of Russian coal and oil by the end of 2022 and designated the daughters of Vladimir Putin and regime associate Sergey Lavrov. Further sanctions have been announced by the UK Foreign Secretary and are expected in the coming days.

On March 30, 2022, the UK passed a seventh amending regulation to its overarching Russian sanctions regulations. The new regulation restructured some of the existing restrictions, and extended existing Crimea-focused restrictions to “non-government controlled Ukrainian territory” which now consists of Crimea and the Donetsk and Luhansk regions.

In tandem with the EU’s fourth package of measures and also on March 15, the UK Government imposed new 35% import tariff on key Russian imports, including iron and steel, aluminum, machinery, and beverages.

The UK has also continued to designate individuals and entities for the purpose of asset freezes. Following the passage of the Economic Crime (Transparency and Enforcement) Act 2022 the UK Government can now target individuals and entities under an “urgent procedure” when comparable jurisdictions (namely, the USA, the EU, Australia and Canada) have imposed comparable sanctions and it is deemed to be in the public interest to make such a designation in the UK. This new power has allowed the government to move quickly to impose sanctions (including 359 designations introduced on the day the act was passed as well as subsequent media-focused designations). In addition, the act introduced a strict civil liability test in relation to sanctions breaches, strengthened the “unexplained wealth order” procedure and requires ultimate beneficial owners of UK property to register in the Register of Overseas Entities.

Several general licenses have been issued and amended by the UK in the previous weeks. Up-to-date versions of the general licenses currently in place can be viewed here.