The week in review presents the impact and analysis for the public, private and not-for-profit sectors of our regular reports on the progress of the global sanctions campaign against Russia.
This week we reviewed recent developments since our last update on April 8 as the United States (US), European Union (EU) and United Kingdom (UK) continue to lead a global coalition in this sanctions campaign, which has been unprecedented in its complexity, impact and speed in responding to Russia’s ongoing war against Ukraine.
Recent developments related to sanctions against Russia
Since the last update, many authorities have taken sanctions-related actions against Russia.
US stocks include:
- On April 9, the US Department of Commerce’s Bureau of Industry and Security (BIS) expanded restrictions on the export and re-export of software and other technology to Russia and Belarus.1
- On April 8, President Joe Biden signed two sanctions bills targeting Russia and Belarus.2 HR 6968 prohibits energy imports from Russia, including petroleum, coal, and natural gas. HR 7108 does the following:
- Suspend normal trade relations with Russia and Belarus;
- Establishes higher tariffs on imports from both countries; and
- Extends the President’s existing sanctions power under the Magnitsky Human Rights Accountability Act indefinitely.
- On April 8, the BRI announced that Iceland, Liechtenstein, Norway and Switzerland had been added to the list of countries excluded from certain licensing requirements of the US rules on sanctions between Russia and Belarus.3 The countries have joined a global coalition of nations that have pledged to implement substantially similar export controls on Russia and Belarus under their national laws.
EU actions include:
- On 11 April, Europol, together with EU Member States, Eurojust and Frontex, launched Operation Oscar to support financial investigations into criminal assets held by sanctioned natural and legal persons in relation to the crisis in Ukraine.4 The initiative will continue for at least a year and will include a number of separate surveys.
- On April 8, the EU formally adopted a fifth round of sanctions against Russia, including a ban on:
- Imports of coal and other solid fossil fuels;
- All Russian vessels accessing EU ports;
- Russian and Belarusian road hauliers to enter the EU;
- Imports of other goods such as wood, cement, seafood and alcohol;
- Exports to Russia of jet fuel and other goods;
- Participation of Russian companies in public procurement in the EU;
- Sale of banknotes and securities denominated in any official currency of EU member states to Russia and Belarus; and
- Deposits in crypto wallets.5
It is estimated that the sanctions will reduce at least 10% of Moscow’s total imports to the EU.6
- Also on April 8, the EU adopted blocking sanctions against 217 individuals and 18 entities, including VTB Bank, Sovkombank, Novikombank and Otkritie.7 These financial institutions are also subject to a prior ban from the SWIFT system.
UK actions include:
- On April 13, the British government announced that it had imposed blocking sanctions on 206 people, including 178 people involved in supporting the so-called Donetsk and Luhansk regions of Ukraine.8
- On April 8, the British government added the daughters of Russian President Vladimir Putin and Foreign Minister Sergei Lavrov to its sanctions list.9 Putin’s daughters – Katerina Vladimirovna Tikhonova and Maria Vladimirovna Vorontsova – and Lavrov’s daughter – Yekaterina Sergeyevna Vinokourova – are subject to travel bans and asset freezes.
- The UK government has released analysis showing that more than £275 billion, or 60%, of Russian currency reserves have been frozen by coordinated UK and international sanctions in recent weeks.ten
Main implications (public, private and not-for-profit sectors)
- On April 13, the Office of Foreign Assets Control (OFAC) General License 22 expired.11 The general license authorized the liquidation of transactions involving Sberbank and any entity in which Sberbank holds, directly or indirectly, a stake of 50% or more. As companies continue to rely on licenses issued by the US, EU and UK, they should consider an effective tracking mechanism as some of the licenses will begin to expire within weeks and the coming months.
- Legislation passed in the United States further emphasizes the permanence of sanctions against Russia. Continuing to pressure Russia in response to its invasion of Ukraine is a priority for the entire US government and will not be easily or quickly reversed.
- Law enforcement agencies around the world, including in jurisdictions not historically known for strong sanctions enforcement, continue to systematically identify, trace and arrest billions of dollars in assets linked or suspected of being linked to sanctioned Russian oligarchs.12 This includes assets held through complex offshore structures or companies owned by family members of sanctioned persons. This reinforces the need for entities in the financial community to conduct thorough investigations of their customers and the assets of those customers. These investigations will help ensure that any assets that may belong to sanctioned individuals or anyone acting on their behalf are identified and taken appropriate action.
- The Russian energy sector will likely continue to be the target of future sanctions depending on the severity of Russian military activity in Ukraine.
- While the United States, the EU and the United Kingdom have largely coordinated their sanctions against Russia, differences remain in the specific prohibitions and authorizations related to the sanctions regimes against Russia implemented by these countries. . Persons subject to EU, UK and US jurisdiction should conduct thorough due diligence on Russia-related transactions and customer relationships to assess associated risk and admissibility under each plan concerned.
- Companies should consider using a risk-based approach to implement policies that restrict or prohibit ongoing business relationships with entities that are sanctioned by other jurisdictions but are not sanctioned by the jurisdiction of origin of the company. For example, a UK company that identifies a US-sanctioned customer but not the UK should consider a policy to restrict doing business with that US-sanctioned entity.