On 14 December 2023, the UK Government introduced two regulations (The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2023 and The Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2023) amending The Russia (Sanctions) (EU Exit) Regulations 2019 to impose further restrictions on goods, technology, and sources of funding that the UK Government considers could support Russia’s war against Ukraine. The majority of the amendments came into force on 15 December 2023; however a number will come into force on 26 December 2023 and 1 January 2024.
Separately, on 15 December, the UK also designated Novikombank, which is now explicitly subject to the UK asset freeze restrictions.
In particular the regulations introduce the following changes:
- Additional export restrictions: Further goods are now subject to sanctions that restrict their export, supply, delivery, and making available to Russia. Such goods include a range of items listed by customs code, including (among others) certain chemicals, electrical goods, metals, vehicles and machine parts that have been added to the following Schedules:
- Schedule 2A: Critical-industry goods and critical-industry technology.
- Schedule 3C: Defence and Security Goods List.
- Schedule 3E: The G7 dependency and further goods list.
The lists of additions to these Schedules are extensive, and include a wide variety of items (including, notably, computers and smartphones), with the UK press release going as far as saying that “[i]n essence, only low-risk, humanitarian, food, and health exports will remain unsanctioned after this”. Items in these Schedules are also subject to restrictions on the provision of technical assistance, financial service and funds, brokering relating to such goods. Therefore, a very careful review will be required on a case-by-case basis for goods and related services involving Russia/persons connected with Russia.
- Introduction of new import restrictions on metals: The regulations introduce a new chapter relating to the import and acquisition of certain metals and supply and delivery of such metals to a third country, as well as many articles of metal. The restricted metals are those defined in Schedule 3BA which includes (amongst others) copper, nickel, aluminum, lead, zinc, tin, tungsten, molybdenum, tantalum, magnesium, cobalt, bismuth, zirconium, antimony, manganese, beryllium, cermets, and articles of “base metal” including tools, implements, cutlery, spoons and forks. The regulations also introduce a grace period for such metals consigned from Russia before 15 December 2023 and imported to the UK before 14 January 2024. Alongside these measures, the UK has also introduced a General Trade Licence relating to the direct or indirect acquisition of metals warrants (as discussed further below).
- Iron and Steel restrictions: The amendments introduce a new category of controlled iron and steel products (pig-iron and spiegeleisen including granules and powders, granules and powders of iron and steel, ferro-alloys, ferrous products obtained by direct reductions of iron ore, iron having a minimum purity by weight of 99.94% and ferrous scrap and remelting scraps of iron and steel) to a newly created Part 4 of Schedule 3B. Notably, these items are not subject to the restrictions on imports of iron and steel incorporating Russian iron/steel implemented from 30 September 2023 (see previous blog here).
The regulations also introduce an additional exception relating to iron and steel goods listed in Part 4 to Schedule 3B that are consigned from Russia before 15 December 2023 and imported to the UK before 14 January 2024. Additionally, the import of iron or steel products and of relevant processed iron or steel products that were exported from Russia before the prohibitions entered into force and are not released into free circulation in the UK are excluded from the prohibitions.
- Import restrictions on Russian diamonds: The regulations introduce a restriction on the import, and acquisition of diamonds and diamond jewellery (as listed in Schedule 3GA) from Russia into the UK, and their supply and delivery from Russia to third countries, as well as related technical assistance, financial services and funding restrictions. The regulations also implement a personal use exemption and extend the standard CEMA enforcement powers to the import of diamonds and diamond jewellery. Please note that these restrictions will enter into force on 1 January 2024.
- Expanded prohibitions on luxury goods: The regulations expand the existing restrictions on the direct and indirect supply, delivery and making available of listed luxury goods to, or for use in, Russia to also restrict the provision of technical assistance, financial service and funds, brokering relating to such luxury goods (aligning with the EU sanctions position). The exceptions to trade restrictions on luxury goods have also been expanded accordingly.
Further Financial Measures
- Correspondent Banking: This measure amends prohibitions on UK credit and financial institutions processing Sterling payments indirectly from designated financial institutions under the Russia Regulations. The amendment expands the prohibition to payments in any currency and implements a new exception to enable UK credit and financial institutions to credit accounts for the purposes of compliance with the regulation. In addition, 27 Russian banks (including Novikombank, which has been newly explicitly designated) have been made subject to these restrictions.
- Divestment Licences: The regulations introduce a new licensing ground for dealings with designated parties to support divestment from Russia, such as UK entities divesting of funds/economic resources in Russia subject to UK sanctions, and UK entities outside Russia wishing to carry out divestment of investors who are the Russian Government or designated persons.
- Frozen Asset reporting: Introduction of an obligation on persons who are designated under the Russia financial sanctions regime to report the assets they hold, and for firms holding assets that they know or suspect are subject to the restrictions on providing financial services to the Russian Central Bank, National Wealth Fund and Russian Ministry of Finance to report these assets to OFSI.
General Licences
Two new General Licences have also been introduced.
- The first is an OFSI General Licence which permits processing of payment from or via certain newly designated banks, and permits processing of non-sterling payments from or via Sberbank. This licence expires on 22 December 2023.
- The second is a trade General Licence which authorises the direct or indirect acquisition of metals warrants on a global metal exchange by certain persons (including global metal exchange members) under certain conditions.
Further guidance can be found on the UK government’s sanctions guidance page: Russia sanctions: guidance – GOV.UK (www.gov.uk)
