July 2014
Update on EU Sanctions against Russia
Practice Group(s):
By Vanessa C. Edwards; Daniel J. Gerkin; Zanda Misina; Philip Torbøl; William M. Reichert; Ian
Meredith; Jerome J. Zaucha
International
Arbitration
International Trade
Further to the most recent alerts circulated on 21 and 28 July, below is an update on
developments in the EU and U.S. regarding sanctions against Russia.
European Union Sanctions
On July 29, 2014, the Council’s Committee of Permanent Representatives reached an
agreement to impose economic sanctions against Russia and additional restrictions for
Crimea and Sevastopol and add further individuals and entities to the list of those subject to
existing restrictive measures.
New restrictions for Crimea and Sevastopol. Today, on July 30, the EU published the
legislative acts formally implementing additional restrictions for Crimea and Sevastopol which
enter into force on July 31. It is prohibited to:
1. grant a financial loan or credit, extend a participation or create any joint venture in the
following sectors: infrastructure projects in the transport, telecommunications and energy
sectors and in relation to the exploitation of oil, gas and certain mineral resources in
Crimea or Sevastopol;
2. sell, transfer or export certain key equipment for the same six sectors to any natural or
legal person, entity or body in Crimea or Sevastopol or for use in Crimea or Sevastopol;
and
3. provide finance and insurance services related to such transactions.
Contracts concluded before July 30, 2014 and notified to the competent authority of the
relevant Member State are exempted. However, contracts for export of key equipment must
be carried out by October 28, 2014.
New designations on targeted sanctions list. The legislative acts adding eight individuals
and three entities to the list of those subject to an asset freeze, a prohibition against making
funds or economic resources available and an EU travel ban were also published on July 30
(please see Appendix 1 for names and the reasons for their inclusion in the list as described
in the EU legislation). The legislative acts entered into force on the same day. The Council
that these individuals and entities are providing support to or are benefitting from Russian
decision makers responsible for the destabilisation of Eastern Ukraine and the illegal
annexation of Crimea.
Economic sanctions. The Council of the EU has confirmed that an agreement to impose
wider economic sanctions has been reached. It will be prohibited to:
Update on EU Sanctions against Russia
1. buy or sell bonds, equity, or similar financial instruments with a maturity exceeding 90
days, issued by major state-owned Russian banks, development banks, their subsidiaries
and those acting on their behalf;
2. provide services relating to the issuing of such financial instruments, e.g. brokering;
3. import and export arms and related material from/to Russia, which covers all items on the
EU common military list;
4. export dual use goods and technology for military use in Russia or to Russian military
end-users, which covers all items in the EU list of dual use goods; and
5. export certain energy-related equipment and technology to Russia without prior
authorisation by competent authorities of Member States. Export licenses will be denied if
products are destined for deep water oil exploration and production, Arctic oil exploration
or production and shale oil projects in Russia.
It is expected that the legislative acts implementing the agreement on economic sanctions
will be published late on July 31 and will enter into force the next day. We will report on any
developments.
United States Sanctions
On July 29, 2014, the United States announced a further expansion of its sanctions
on Russia in connection with escalating tensions in Eastern Ukraine. Specifically, the U.S.
Department of the Treasury, Office of Foreign Assets Control (“OFAC”) announced the
imposition of sectoral sanctions against three additional Russian entities in the financial
services sector and added a Russian entity to its Specially Designated Nationals and
Blocked Persons list (“SDN list”). Further, the U.S. Department of Commerce, Bureau of
Industry and Security (“BIS”) followed suit by announcing it will add the same entity to its
Entity List and also that it “will institute a policy denying export, reexport or foreign transfer of
certain items for use in Russia's energy sector that may be used for exploration or production
from deepwater, Arctic offshore, or shale projects that have the potential to produce oil.”
OFAC Sectoral Sanctions. Pursuant to Executive Order 13662 (Mar. 20, 2014),
which authorized the imposition of sanctions targeting the defense and related materiel,
energy, engineering, financial services, and metals and mining sectors of the Russian
economy, OFAC has added the following three entities in the Russian financial services
sector to its Sectoral Sanctions Identification List (“SSIL”): (i) BANK OF MOSCOW; (ii)
RUSSIAN AGRICULTURAL BANK; and (iii) VTB BANK OAO. As with the prior entities listed
in the financial services sector, as stated in the new listings: “The following transactions by
U.S. persons or within the United States are hereby prohibited: transacting in, providing
financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity
for these persons (listed here), their property, or their interests in property.” The complete
listings are set forth in Appendix 1. As previously noted, entities 50 percent or more owned
by such listed entities are also considered included on the Sectoral Sanctions Identification
list and are subject to the same restrictions.
Please note, as mentioned in a prior update, although the Presidential Directives
underlying OFAC’s implementation of the new sectoral sanctions use the term debt/equity
“for” “the listed entities,” the prior Sectoral Sanctions Identifications List listings used the term
debt/equity “of” “the listed entities.” However, since the date of the last update, the prior
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Update on EU Sanctions against Russia
listings have been modified to utilize the debt/equity “for” language, which is also used in the
new listings as described above. Based on the most recent Frequently Asked Questions
relating to the sanctions released by OFAC it remains unclear whether the difference in
language materially affects the scope of the restrictions.
OFAC SDN Designation. In addition to the sectoral sanctions detailed above,
OFAC also added the entity set forth in Appendix 3 to the SDN list. As a result, the property
and interests in property of that entity, as well as entities that are 50 percent or more owned,
directly or indirectly, by such person, that are in the United States, that come within the
United States, or that are or come within the possession or control of any U.S. person, are
blocked.
BIS Actions. In addition to the OFAC sanction extensions, BIS also will add OJSC
United Shipbuilding Corporation to its Entity List and announced it will be implementing new
licensing measures targeting the Russian energy sector. Specifically, BIS stated: “BIS will
institute a policy denying export, reexport or foreign transfer of certain items for use in
Russia's energy sector that may be used for exploration or production from deepwater, Arctic
offshore, or shale projects that have the potential to produce oil. While these sanctions do
not target or interfere with the current supply of energy from Russia or prevent Russian
companies from selling oil and gas to any country, they make it difficult for Russia to develop
long-term, technically challenging future projects.” Implementing regulations should be
issued shortly.
Authors:
Vanessa C. Edwards
vanessa.edwards@klgates.com
+32.(0)2.336.1920
Daniel J. Gerkin
daniel.gerkin@klgates.com
+1 202.778.9168
Zanda Misina
Zanda.Misina@klgates.com
+44.(0).20.7360.8270
Philip Torbøl
philip.torbol@klgates.com
+32.(0).2.336.1903
William M. Reichert
william.reichert@klgates.com
+7.495.643.1712
Ian Meredith
ian.meredith@klgates.com
+44.(0).20.7360.8171
Jerome J. Zaucha
jerome.zaucha@klgates.com
+1 202.778.9168
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Update on EU Sanctions against Russia
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Appendix 1
Individuals
1. Alexey Alexeyevich GROMOV (Born on 31.5.1960; in Zagorsk (Sergiev Posad))- As
first Deputy Chief of Staff of the Presidential Administration, he is responsible for
instructing Russian media outlets to take a line favourable with the separatists in Ukraine
and the annexation of Crimea, therefore supporting the destabilisation of Eastern Ukraine
and the annexation of Crimea.
2. Oksana TCHIGRINA (Оксана Чигрина)- Spokesperson of the so called ‘government’
of the so called ‘Lugansk People's Republic’ who made declarations justifying inter alia
the shooting down of a Ukrainian military airplane, the taking of hostages, fighting
activities by the illegal armed groups, which have as a consequence undermined the
territorial integrity, sovereignty and unity of Ukraine.
3. Boris LITVINOV (Борис Литвинов)- As of 22 July, chairman of the so-called
‘Supreme Council’ of the so called ‘Donetsk People's Republic’ who was at the source of
policies and the organisation of the illegal referendum leading to the proclamation of the
so-called ‘Donetsk People's Republic’, which constituted a breach of the territorial
integrity, sovereignty and unity of Ukraine.
4. Sergey ABISOV (Born on 27.11. 1967)- By accepting his appointment as so-called
‘Minister of Interior of the Republic of Crimea’ by the President of Russia (decree No.301)
on 5 May 2014 and by his actions as so-called ‘Minister of Interior’ he has undermined the
territorial integrity, sovereignty and unity of Ukraine
5. Arkady Romanovich ROTENBERG (Born on 15.12.1951 in Leningrad (St
Petersburg))- Mr Rotenberg is a long-time acquaintance of President Putin and his former
judo sparring partner. He has developed his fortune during President Putin's tenure. He
has been favoured by Russian decision-makers in the award of important contracts by the
Russian State or by State-owned enterprises. His companies were notably awarded
several highly lucrative contracts for the preparations of the Sochi Olympic Games. He is
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Update on EU Sanctions against Russia
a major shareholder of Giprotransmost, a company which has received a public
procurement contract by a Russian State-owned Company to conduct the feasibility study
of the construction of a bridge from Russia to the illegally annexed Autonomous Republic
of Crimea, therefore consolidating its integration into the Russian Federation which in turn
further undermines the territorial integrity of Ukraine.
6. Konstantin Valerevich MALOFEEV (Константин Валерьевич Малофеев) (Born on
3.7.1974 in Puschino)- Mr Malofeev is closely linked to Ukrainian separatists in Eastern
Ulkraine and Crimea. He is a former employer of Mr Borodai, so-called Prime Minister of
the so-called ‘Donetsk People's Republic’ and met with Mr Aksyonov, so-called Prime
Minister of the so-called ‘Republic of Crimea’, during the period of the Crimean
annexation process. The Ukrainian Government has opened a criminal investigation into
his alleged material and financial support to separatists. In addition, he gave a number of
public statements supporting the annexation of Crimea and the incorporation of Ukraine
into Russia and notably stated in June 2014 that ‘You can't incorporate the whole of
Ukraine into Russia. The East (of Ukraine) maybe’. Therefore Mr. Malofeev is acting in
support of the destabilisation of Eastern Ukraine.
7. Yuriy Valentinovich KOVALCHUK (Юрий Валентинович Ковальчук) (Born on
25.7.1951 in Leningrad (St Petersburg))- Mr Kovalchuk is a long-time acquaintance of
President Putin. He is a co-founder of the so-called Ozero Dacha, a co-operative society
bringing together an influential group of individuals around President Putin. He is
benefiting from his links with Russian decision-makers. He is the chairman and largest
shareholder of Bank Rossiya, of which he owned around 38 % in 2013, and which is
considered the personal bank of Senior Officials of the Russian Federation. Since the
illegal annexation of Crimea, Bank Rossiya has opened branches across Crimea and
Sevastopol, thereby consolidating their integration into the Russian Federation.
Furthermore, Bank Rossiya has important stakes in the National Media Group which in
turn controls television stations which actively support the Russian government's policies
of destabilisation of Ukraine.
8. Nikolay Terentievich SHAMALOV (Николай Терентьевич Шамалов) (Born on
24.1.1950)- Mr Shamalov is a long-time acquaintance of President Putin. He is a cofounder of the so-called Ozero Dacha, a co-operative society bringing together an
influential group of individuals around President Putin. He benefits from his links with
Russian decision-makers. He is the second largest shareholder of Bank Rossiya, of which
he owned around 10 % in 2013, and which is considered the personal bank of Senior
Officials of the Russian Federation. Since the illegal annexation of Crimea, Bank Rossiya
has opened branches across Crimea and Sevastopol, thereby consolidating their
integration into the Russian Federation. Furthermore, Bank Rossiya has important stakes
in the National Media Group which in its turn controls television stations which actively
support the Russian government's policies of destabilisation of Ukraine.
Entities
1. JOINT-STOCK COMPANY CONCERN ALMAZ-ANTEY (a.k.a. ALMAZ-ANTEY
CORP; a.k.a. ALMAZ-ANTEY DEFENSE CORPORATION; a.k.a. ALMAZ-ANTEY JSC;)Almaz-Antei is a Russian state-owned company. It manufactures anti-aircraft weaponry
including surface-to-air missiles which it supplies to the Russian army. The Russian
authorities have been providing heavy weaponry to separatists in Eastern Ukraine,
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Update on EU Sanctions against Russia
contributing to the destabilization of Ukraine. These weapons are used by the separatists,
including for shooting down airplanes. As a state-owned company, Almaz-Antei therefore
contributes to the destabilization of Ukraine.
2. DOBROLET aka DOBROLYOT (Добролет/Добролёт)- Dobrolet is a subsidiary of a
Russian state-owned airline. Since the illegal annexation of Crimea Dobrolet has so far
exclusively operated flights between Moscow and Simferopol. It therefore facilitates the
integration of the illegally annexed Autonomous Republic of Crimea into the Russian
Federation and undermines Ukrainian sovereignty and territorial integrity.
3. RUSSIAN NATIONAL COMMERCIAL BANK- After the illegal annexation of Crimea,
Russian National Commercial Bank (RNCB) became fully owned by the so-called
‘Republic of Crimea’. It has become the dominant player in the market, while it had no
presence in Crimea before the annexation. By buying or taking over from branches of
retreating banks operating in Crimea, RNCB supported materially and financially the
actions of the Russian government to integrate Crimea into the Russian Federation, thus
undermining Ukraine's territorial integrity.provide services relating to the issuing of such
financial instruments, e.g. brokering;
Appendix 2
BANK OF MOSCOW (f.k.a. AKTSIONERNY KOMMERCHESKI BANK BANK MOSKVY,
OTKRYTOE AKTSIONERNOE OBSCHCHESTVO; a.k.a. JOINT STOCK COMMERCIAL
BANK - BANK OF MOSCOW, OPEN JOINT STOCK COMPANY), 8/15 Korp. 3 ul.
Rozhdestvenka, Moscow 107996, Russia; Bld 3 8/15, Rozhdestvenka St., Moscow 107996,
Russia; SWIFT/BIC MOSW RU MM; Website www.bm.ru; Email Address
holmogorov_ss@mmbank.ru; alt. Email Address info@mmbank.ru; BIK (RU) 044525219;
Registration ID 1027700159497; Government Gazette Number 29292940; The following
transactions by U.S. persons or within the United States are hereby prohibited: transacting
in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity
or new equity for these persons (listed here), their property, or their interests in property. All
other transactions with these persons or involving any property in which one or more of these
persons has an interest are permitted, provided such transactions do not otherwise involve
property or interests in property of a person blocked pursuant to Executive Orders 13660,
13661, or 13662, or any other sanctions programs implemented by the Office of Foreign
Assets Control. [UKRAINE-EO13662].
RUSSIAN AGRICULTURAL BANK (f.k.a. OTKRYTOE AKTSIONERNOE ROSSISKI
SELSKOKHOZYAISTVENNY BANK; a.k.a. ROSSELKHOZBANK; a.k.a. ROSSIYSKI
SELSKOKHOZYAISTVENNY BANK OAO; a.k.a. RUSSIAN AGRICULTURAL BANK OAO),
3, Gagarinsky Pereulok, Moscow 119034, Russia; 3 Gagarinsky per., Moscow 119034,
Russia; SWIFT/BIC RUAG RU MM; Website http://www.rshb.ru; Email Address
office@rshb.ru; Registration ID 1027700342890; Government Gazette Number 52750822;
The following transactions by U.S. persons or within the United States are hereby prohibited:
transacting in, providing financing for, or otherwise dealing in new debt of longer than 90
days maturity or new equity for these persons (listed here), their property, or their interests in
property. All other transactions with these persons or involving any property in which one or
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Update on EU Sanctions against Russia
more of these persons has an interest are permitted, provided such transactions do not
otherwise involve property or interests in property of a person blocked pursuant to Executive
Orders 13660, 13661, or 13662, or any other sanctions programs implemented by the Office
of Foreign Assets Control. [UKRAINE-EO13662].
VTB BANK OAO (f.k.a. BANK VNESHNEY TORGOVLI ROSSIYSKOY FEDERATSII,
CLOSED JOINT-STOCK COMPANY; f.k.a. BANK VNESHNEY TORGOVLI RSFSR; f.k.a.
BANK VNESHNEY TORGOVLI, JOINT-STOCK COMPANY; f.k.a. BANK VNESHNEY
TORGOVLI, OPEN JOINT-STOCK COMPANY; a.k.a. BANK VTB OAO; a.k.a. BANK VTB,
OPEN JOINT-STOCK COMPANY; a.k.a. JSC VTB BANK; f.k.a. VNESHTORGBANK; f.k.a.
VNESHTORGBANK ROSSII, CLOSED JOINT-STOCK COMPANY; a.k.a. VTB BANK,
OPEN JOINT-STOCK COMPANY), 29, Bolshaya Morskaya str., St. Petersburg 190000,
Russia; 37 Plyushchikha ul., Moscow 119121, Russia; 43, Vorontsovskaya str., Moscow
109044, Russia; SWIFT/BIC VTBRRUMM; Website www.vtb.com; Registration ID
1027739609391 (Russia); Tax ID No. 7702070139 (Russia); Government Gazette Number
00032520 (Russia); License 1000 (Russia); The following transactions by U.S. persons or
within the United States are hereby prohibited: transacting in, providing financing for, or
otherwise dealing in new debt of longer than 90 days maturity or new equity for these
persons (listed here), their property, or their interests in property. All other transactions with
these persons or involving any property in which one or more of these persons has an
interest are permitted, provided such transactions do not otherwise involve property or
interests in property of a person blocked pursuant to Executive Orders 13660, 13661, or
13662, or any other sanctions programs implemented by the Office of Foreign Assets
Control. [UKRAINE-EO13662].
Appendix 3
UNITED SHIPBUILDING CORPORATION (a.k.a. OBEDINENNAYA SUDOSTROITELNAYA
KORPORATSIYA OAO; a.k.a. OJSC UNITED SHIPBUILDING CORPORATION; a.k.a.
UNITED SHIPBUILDING CORPORATION JOINT STOCK COMPANY; a.k.a. "OSK OAO"),
90, Marata ul., St. Petersburg 191119, Russia; 11, Sadovaya-Kudrinskaya str., Moscow
123242, Russia; Website http://www.oaoosk.ru/; Email Address info@oaoosk.ru
[UKRAINE2].
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