EU sanctions against Russia

The Council of European Union regulation on new sanctions against Russia entered into force on 1 August 2014. Sanctions will be valid for a year with the possibility of revision after three months since the moment of entering into force. „Actions by natural or legal persons, entities or bodies shall not give rise to liability of any kind on their part, if they did not know, and had no reasonable cause to suspect, that their actions would infringe the measures set out in this Regulation“ – article 10 of the regulation[1]. Similar measures towards Russia are introduced by the USA, Canada, Australia, Switzerland and Japan.

• Sanctions affect banks 50% or more of the shares of which are owned by the Russian Federation directly or indirectly. Such banks are VTB, Russian Agricultural Bank, VEB (Globeks and Svyaz-bank), Sberbank, Gazprombank[2].
• It is prohibited for the European investors to purchase euro stocks of these banks and trade them on European stock markets. Sanctions do not have retroactive effect and will affect only new transactions.
• European residents are not allowed to provide these banks with medium- or long-term financing.
• A prior authorisation shall be required for the sale, supply, transfer or export, directly or indirectly, of certain technologies for the oil industry in Russia.
• Restrictions on services related to the supply of arms and military equipment, if an embargo on such goods is applied by the Member States.
• It is prohibited to sell, supply, transfer or export, directly or indirectly, dual-use goods and technology in Russia or for use in Russia (all military and dual-use goods are mentioned in EU Common Military List).
• It is prohibited to provide technical, financial or other assistance related to military goods and technology, deliveries, producing, exploitation and usage of arms and equipment related to arms.
• Any financial services concerning military goods and technologies are prohibited.
• Purchasing and importing arms and related equipment from Russia is prohibited.
• A prior authorisation shall be required for the sale, supply, transfer or export, directly or indirectly, of technologies, whether or not originating in the Union, to any natural or legal person, entity or body in Russia or in any other country, if such equipment or technology is for use in Russia (equipment and technology are listed in Annex II to the regulation).

USA sanctions against Russia

• USA entities and citizens are not allowed to purchase debt instruments with a maturity of over 90 days of Bank of Moscow, Russian Agricultural Bank and VTB or subsidiaries, affiliates, and agents of designated entities. Other transactions with these banks are allowed.
• USA imposed export controls on a wide range of items intended for use in the exploration or production of “deepwater” (deeper than 500ft (152.4 m)), “Arctic offshore” or “shale projects” that have the potential to produce oil or gas in Russia. If an exporter is not able to define in which projects the equipment will be used he will fail to obtain the licence.

Russian retaliatory sanctions

Imposed sanctions:

• Import of beef, pork, fruits, poultry, cheese, vegetables, nuts, fish, seafood, milk and milk-containing products from Australia, Canada, member-states of EU, USA, Norway is prohibited for a year. This prohibition does not concern baby food and goods purchased by physical persons.

Contemplated sanctions:

• Prices on energy resources can be increased.
• There is a bill in the Russian parliament by which it is planned to prohibit foreign entities and persons registered in “aggressor-country”[3] and the Russian legal and physical persons affiliated or depending from these foreign persons to perform auditing, legal consulting and other consulting services on the territory of the Russian Federation. In particular, these restrictions will affect such companies as: Deloitte, KPMG, Ernst & Young, PriceWaterhouseCoopers, Boston Consulting Group, McKinsey.
• In perspective, it is planned to limit the activity of the foreign credit institutions in Russia.
• The possibility of applying restrictions or prohibiting European airlines’ transit flights from Europe to Asia through the Russian territory is being discussed.
• Restrictions may be imposed on shipbuilding, aircraft industry and car-manufacturing sectors.