In concert with the United States, the European Union has also strengthened its restrictive measures in respect of actions by Russia “undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.” The new EU sanctions, issued September 8, 2012, are set forth in Council Regulation (EU) No. 960/2014 and Council Implementing Regulation (EU) No. 961/2014. Effective September 12, 2014, through publication in the EU Official Journal, the new EU introduced a number of meaures to reinforce trade and financial restrictions against Russia: (1) adding new persons to the EU “blacklist” subject to a travel ban and asset freeze; (2) limiting access to EU capital markets by Russian finance, defense and energy firms; (3) prohibiting the provision of services to the Russian energy sector; and (4) extending the ban on export of dual use goods and technology for military use in Russia.
I. Addition of 24 Persons to EU “Blacklist”
The EU has added 24 persons to the “blacklist” – persons or entities subject to a travel ban and an asset freeze, respectively. They comprise persons involved in actions against Ukraine's territorial integrity, including the new leadership in Donbass, the government of Crimea as well as Russian decision-makers and oligarchs. This brings the total of persons subject to sanctions to 119 while 23 entities remain under asset freeze in the EU. Additionally, the EU expanded the legal basis to allow imposing asset freezes and travel bans on persons or entities conducting transactions with separatist groups in the Donbass region.
An asset freeze concerns funds and economic resources owned or controlled by targeted individuals or entities. An asset freeze also includes a ban on providing resources to the targeted entities and persons. This means that EU citizens and companies must not make payments or supply goods and other assets to them. In effect, business transactions with designated companies and persons cannot legally be carried out.
Persons targeted by a travel ban will be denied entry to the EU at the external borders. If visas are required for entering the EU, they will not be granted to persons subject to such restrictions on admissions.
II. Limiting Access to EU Capital Markets
The EU has strengthened restrictions on access to EU capital markets by Russian finance, defense and energy concerns. EU nationals and companies may no more provide loans to five major Russian state-owned banks (Sberbank, VTB Bank, Gazprombank, Vnesheconombank, and Rosselkhozbank). At the same time, trade in new bonds, equity or similar financial instruments with a maturity exceeding 30 days, issued by the same banks after September 12, 2014, is now generally prohibited. The maturity date, under the prior restriction, was 90 days. The same financial restrictions have been extended to three major Russian defense companies (OPK Oboronprom, United Aircraft Corporation, and Uralvagonzavod) and three major energy companies (Rosneft, Transneft, and Gazprom Neft). Providing services related to the issuing of the above financial instruments, e.g. brokering, is also included in the prohibition.
III. Prohibition on Services to Russian Energy Sector
The EU has expanded sectoral sanctions targeting the Russian energy sector by prohibiting the provision, directly or indirectly, of certain services necessary for deepwater oil exploration and production, arctic oil exploration and production, or shale oil projects in Russia. This include a ban on drilling, well testing, logging and completion services, and supply of specialized floating vessels. This measure builds upon the prior restriction on exports of certain technologies to the Russian oil industry for use in deepwater, Arctic or shale oil projects in Russia. The EU is allowing for the grandfathering of service contracts executed before September 12, 2014 (an exception not found in similar U.S. sanctions), and a limited exception for services necessary for health and safety and environmental reasons.
IV. Extension of Export Controls on Dual-Use Goods and Technology
The EU has extended its ban on exporting dual-use goods and technologies for military use in Russia to include a list of nine mixed Russian defense firms:
JSC Sirius (optoelectronics for civil and military purposes);
JSC Stankoinstrument (mechanical engineering for civil and military purposes);
OAO JSC Chemcomposite (materials for civil and military purposes);
JSC Kalashnikov (small arms);
JSC Tula Arms Plant (weapons systems);
NPK Technologii Maschinostrojenija (ammunition);
OAO Wysokototschnye Kompleksi (anti-aircraft and anti-tank systems);
OAO Almaz Antey (state-owned enterprise; arms, ammunition, research); and
OAO NPO Bazalt (state-owned enterprise, production of machinery for the production of arms and ammunition).
This prohibition also extends to the provision of related technical assistance, brokering services, financing or financial assistance. Contracts or agreements concluded before September 12, 2014 are not subject to the prohibition pursuant to a grandfathering clause. The new export controls do not apply to the sale, supply, transfer or export of dual-use goods and technology intended for the aeronautics and space industry, or for non-military use and for a non-military end user, as well as for maintenance and safety of existing civil nuclear capabilities within the EU.
The EU also strengthened the sanctions associated with goods and listed in the EU Common Military List to prohibit financing and financial assistance, including insurance and reinsurance, for any sale, supply, transfer, or export of such items, and related technical assistance, in Russia.
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Firms engaged in business in Russia must closely monitor these developments and address any compliance risks and requirements under EU law and corresponding U.S. law. TWG has been continuously representing and working with companies doing business in Russia, Ukraine and the CIS for two decades. For further information, please contact Mr. Glenn Wicks or Mr. Ronce Almond via email or via telephone at (202) 457-7790.