On 23 February 2022, the Council adopted a package of measures to respond to Russia’s decision to recognize the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine as independent entities, and the subsequent decision to send Russian troops into these areas.
The package consists of the measures outlined below.
Targeted restrictive measures
- Within the existing framework for sanctions, the EU has designated all the 351 members of the Russian State Duma, who voted in favour of the appeal to President Putin to recognise the independence of the self-proclaimed Donetsk and Luhansk ”republics”. This is in line with the UK’s plan to impose similar sanctions measures.
- Moreover, 27 high profile individuals and entities have been designated. These include decision makers such as members of the government, who were involved in the decision to recognize the independence of the non-government controlled areas; banks (Bank Rossiya, PROMSVYAZBANK and VEB.RF, all three of which have already been designated by the US, while the UK has designated the first two banks) and certain businesspersons/oligarchs; senior military officers; and individuals accused of leading a disinformation war against Ukraine. Note that in relation to the designated banks, the EU is allowing Member States to grant licenses for the release or making available of funds for the wind-down of existing agreements (including correspondent banking arrangements) by 24 August 2022.
- Restrictive measures include an asset freeze and a prohibition from making funds available to the listed individuals and entities. In addition, a travel ban applicable to the listed persons prevents them from entering or transiting through EU territory.
Restrictions on economic relations with the non-government controlled areas of the Donetsk and Luhansk oblasts
New measures will target trade from the non-government controlled areas of the Donetsk and Luhansk to and from the EU. These restrictions broadly mirror the restrictions that have been in place against Crimea and Sevastopol since 2014. In particular, the following restrictions have been imposed:
- an import ban on goods from the non-government controlled areas of the Donetsk and Luhansk oblasts, as well as a ban on associated financing and financial assistance;
- restrictions on investment in the regions, including the purchase of land, the purchase of shares and securities of entities in the regions, entering into financing and joint venture agreements with entities in the regions, and the provision of investment services related to these activities;
- a prohibition on the supply of tourism services;
- an export ban for a wide array of goods and technologies (aimed at the transport, telecommunications, energy, and oil, gas and minerals sectors, but covering a wide range of goods that may impact many other sectors). The ban also prohibits the provision of technical services, financing and financial assistance related to these items for use in the regions; and
- a ban on providing technical assistance, brokering, construction or engineering services directly relating to infrastructure in the non-government controlled areas within the transport, telecommunications, energy, and oil, gas and minerals sectors.
Note that the restrictions outlined above only apply to the “non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine”, signifying that trade with areas under Ukrainian government control is not affected.
Financial restrictions
The EU has introduced a sectoral prohibition aimed at restricting access to capital by the Russian Federation, its government and Central Bank, as well as entities acting on behalf or at the direction of the Central Bank of Russia.
As such, it will be prohibited to directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments issued after 9 March 2022 by Russia and its government or the Central Bank of Russia (or any person acting on behalf or at the direction of the Central Bank of Russia).
Furthermore, after 23 February 2022, it will be prohibited to directly or indirectly make or be part of any arrangement to make any new loans or credit to the persons outlined above. However, this prohibition will not apply to loans or credit for the financing of non-prohibited imports or exports of goods and non-financial services between the EU and any other country. There are also exceptions for loans that were agreed prior to 23 February, subject to fulfilment of certain conditions.
These restrictions are similar to the EU’s existing sectoral sanctions restrictions against certain Russian banks, oil companies and defence companies. However, unlike those previous measures, there is no minimum maturity period for the securities or loans that are restricted. Accordingly, a loan of any length, or a security of any maturity length, would be restricted if an exemption does not apply.
Further sanctions to come
Note that after Russia’s invasion of Ukraine on the night to Thursday 24 February 2022, the Presidents of the EU Council and the European Commission have announced that they will “…outline a further sanctions package which is being finalised by the European Commission and which the Council will swiftly adopt”. We are monitoring the situation and will update this blog with further developments.
