The latest waves of sanctions are made up of two types of measures, with some targeting specific entities and individuals, and others targeting specific sectors in the Russian economy.
Measures targeting specific entities and individuals
On 23 February 2022, the US announced that it was adding Nord Stream 2 AG ("NS2") to the Specially Designated Nationals ("SDN") List. NS2 is a Swiss-subsidiary of the Russian state-owned energy company Gazprom and is the developer of the Nord Stream 2 pipeline built to transport gas from Russia to Germany via the Baltic.
Yesterday evening (24 February), the US took more forceful action and added four large Russian banks to its SDN List: VTB, Bank Otkritie, Sovocombank OJSC, and Novikombank (and 34 of these banks subsidiaries). VTB is the second-largest financial institution in Russia and is active in international investment banking transactions.
Furthermore, more government officials, business leaders and their family members have been designated as SDNs, including the son of Rosneft CEO Igor Sechin.
The US assets of the entities and individuals added to the SDN List will be frozen and US persons will be prohibited from dealing with them (although note that in certain limited situations, US persons may be allowed a period of time to wind down there dealings). Furthermore, US officials may freeze the assets of non-US persons who deal with the SDNs.
Prohibitions on dollar-denominated transactions
The US also imposed sanctions on Sberbank that prohibit US financial institutions for opening or maintaining correspondent or payable-through accounts. This prevents Sberbank from handling any dollar-denominated transactions and essentially locks it out of the US financial system.
Prohibitions on debt and equity financing
Additionally, the US has prohibited US persons from providing new debt or equity financing to the 13 financial institutions and corporations listed here, which include Gazprom, Alfa-Bank, and Sovcomflot.
Measures targeting economic sectors
The US Department of Commerce has issued new export rules that are designed to restrict Russia's access to goods and materials that can be used in the technology and defence sectors. The rules impose licensing requirements on parties seeking to export a host of items from the US, manufactured in the US or containing US components. The US Department of Commerce has established that there will be a policy of denial – with a few limited exceptions – for seeking export licenses. More information about these measures is available here.
Implementation of sanctions relating to Donetsk and Luhansk regions
On 24 February 2022, the sanctions adopted by the EU in response to Russia's recognition the non-government controlled areas of the Donetsk and Luhansk regions on earlier this week came into force (link available here). In brief, and as expected, these sanctions are rather limited in scope and broadly include:
- Targeted sanctions (asset freeze, travel ban and prohibition from making funds available) against (i) the 351 members of the Russian State Duma, and (ii) 22 individuals and four entities (i.e. Bank Rossiya, Promsvyazbank,
Vnesheconombank and Internet Research Agency). Names and identifying
information concerning these persons may be found here.
- Restrictions on economic relations with the Donetsk and Luhansk regions, broadly:
- restrictions on import of goods originating in the regions and related financing and insurance;
- restrictions on export of certain goods and technology to or for use in
regions, in the following key sectors: (i) transport, (ii) telecommunications, (iii) energy and (iv) the prospecting, exploration and production of oil, gas and mineral resources;
- restrictions on certain investments and tourism in the Donetsk and Luhansk regions
- Restrictions on the ability of the Russian state, government and Central Bank to European capital and financial markets and services.
Announcement of new and broader sanctions package
In addition, the EU announced yesterday (24 February) the imposition of an additional package of sanctions. Reportedly, the sanctions will include both sectoral and individual restrictive measures that have been coordinated with partners such as the US.
The new sanctions are expected to be adopted within short. While legislative documents have not yet been published, the main content of the new package has been described by EU officials to include the following main components (links available e.g. here, here, here, here):
- Financial sanctions that will limit Russia's access to the most important capital markets; including on banks and "key state-owned companies, including the field of defence";
- Restrictions on the energy sector, which appears to include an export ban aimed at limiting Russia's ability to upgrade oil refineries;
- Restrictions on the transport sector, and in particular Russia's air fleet;
- Export controls and ban on export financing, with particular focus on limiting Russia's access to technologies (components and software);
- Targeted restrictive measures against additional Russian persons.
Announcement of new sanctions
On 24 February 2022, the UK Prime Minister announced that the UK will impose "largest and most severe package of economic sanctions that Russia has ever seen" (link available here).
The new UK sanctions legislation is due to be implemented early next week. The sanctions are expected to include the following measures:
• Immediate suspension of all dual-use export licences to Russia, and further
controls on the export of dual-use goods (including goods used in the
electronics, telecoms, aerospace and oil and gas sectors);
• Prohibitions on Russian participation in UK money markets, against both state
and private entities, and asset freezes on all major Russian banks;
• Targeted sanctions against over 100 individuals and entities;
• Restrictions on Russian national's use of the UK banking system;
• Ban on Aeroflot operating in the UK.
Additional designations of individuals and entities
In addition, the UK designated yesterday (24 February) 11 additional individuals and entities on the UK sanctions list, with VTB Bank being a notable inclusion. The names of and identifying information concerning these persons may be found here.