This Alert is the latest in a series on the Russia/Ukraine sanctions available on our website.
This morning, the EU published further sanctions to increase the pressure on Russia for its involvement in the Ukraine. The new measures add to the already complex restrictions in place and should be carefully considered.
- Council Regulation (EU) No 833/2014 is amended to expand or introduce restrictions related to dual-use goods and technology, the provision of certain services related to the Russian oil industry, the Common Military List, and access to the capital market for certain institutions (by Council Regulation (EU) No 960/2014 of 8 September 2014).
- Restrictive measures are expanded to target individuals or entities conducting transactions with the separatist groups in the Donbass region of Ukraine (by Council Regulation (EU) No 959/2014 of 8 September 2014).
- The list of persons and entities subject to restrictive measures is updated to include 24 new individuals (by Council Implementing Regulation (EU) No 961/2014 of 8 September 2014).
Strengthening of restrictions on dual-use technology, services related to the supply of arms and military equipment, certain technologies relating to the oil industry in Russia, and access to the capital market for financial institutions On 8 September 2014, the Council of the European Union published Council Regulation (EU) No 960/2014 (the ‘Regulation’) (amending Council Regulation (EU) No 833/2014). The Regulation brings into immediate force a number of key changes in dual-use technologies, the Russian oil industry, the Common Military List, and access to the capital market for certain institutions.
Dual-use technologies A prohibition on the sale, supply, transfer or export of dual-use goods and technology is introduced specifying nine companies:
- JSC SIRIUS
- OJSC STANKOINSTRUMENT
- OAO JSC CHEMCOMPOSITE
- JSC KALASHNIKOV
- JSC TULA ARMS PLANT
- NPK TECHNOLOGII MASCHINOSTROJENIJA
- OAO WYSOKOTOTSCHNYE KOMPLESKI
- OAO ALMAZ ANTEY
- OAO NPO BAZALT
This prohibition is introduced in addition to the existing measures on dual-use technologies, and imposes further restrictions in relation to the named companies. In particular, the prohibition is extended to include ancillary services related to dual-use technologies, including the provision of technical assistance, brokering services, manufacturing and maintenance services, and financing or financial assistance.
This new prohibition applies only to contracts or agreements concluded after 12 September 2014.
Restrictions around the Russian oil industry Measures have been introduced relating specifically to the provision of certain services associated with deep water oil exploration and production, arctic oil exploration and production, or shale oil projects. These measures prohibit the supply of specific services, namely (i) drilling, (ii) well testing, (iii) logging and completion services, (iv) supply of specialised floating vessels, with no provision included for authorities to grant an export authorisation.
This prohibition does not apply to obligations arising from contracts or frameworks concluded before 12 September 2014, or to ancillary contracts necessary for the performance of such contracts, or where the services are necessary for the urgent prevention or mitigation of an event likely to have a serious impact on human health and safety or the environment.
The Common Military List The existing prohibition in the direct or indirect financing of goods and technology in the Common Military List has been extended to prohibit insurance and reinsurance for any dealing with such items.
Access to the capital market for certain institutions The Regulation implements significant changes to the restrictions around capital markets. It is necessary to note that the Regulation makes the following changes to the drafting of Council Regulation (EU) No 833/2014:
- The term ‘brokering’ is replaced by ‘investment services’, although the activities listed remain the same.
- The reference to securities giving rise to cash settlements has been removed from the definition of ‘transferable securities’.
The existing prohibition on dealing with transferable securities and money-market instruments in relation to the below-mentioned banks has been updated to restrict those transferable securities and money-market instruments with a maturity exceeding 90 days to the period 1 August 2014 to 12 September 2014 and thereafter, restricting access to such instruments after 12 September with a maturity exceeding 30 days:
- VTB BANK
This is a significant reduction from the maturity period of 90 days that had previously applied.
In addition, a prohibition is introduced on dealing with transferable securities and money-market instruments issued with a maturity exceeding 30 days after 12 September 2014 by:
- OPK OBORONPROM
- UNITED AIRCRAFT CORPORATION
- GAZPROM NEFT
The prohibition extends to any entity established outside the EU whose proprietary rights are directly or indirectly owned by an entity listed above, or to any entity acting on behalf of a body falling within the above.
Finally, a prohibition is implemented on directly or indirectly making loans with a maturity exceeding 30 days to any of the above-listed entities after 12 September 2014, except for where such loans have a specific and documented objective of providing financing for non-prohibited imports or exports and non-financial services between the EU and Russia, or in certain circumstances to provide emergency funding for solvency and liquidity purposes.
The Regulation has also clarified that financial services other than those referred to in Article 5 of the Regulation, such as deposit services, payment services, insurance services, loans from the institutions referred to above, and derivatives used for hedging purposes in the energy market, are not covered by these restrictions. In addition, loans are only to be considered new loans if they are drawn after 12 September 2014.
Expansion of restrictive measures Also on 8 September 2014, the Council of the European Union published Council Regulation (EU) No 959/2014 (amending Council Regulation (EU) No 269/2014). The Regulation expands the restrictive measures imposed by the region to allow such measures to be applied to individuals or entities conducting transactions with separatist groups in the Donbass region of Ukraine.
The list of natural and legal persons subject to restrictive measures is also updated to include 24 new individuals by Council Implementing Regulation (EU) No 961/2014.
At the time of writing this alert, new U.S. sanctions were published by OFAC; details of these will be published on our blog shortly.
If you have any queries about the contents of this alert or about sanctions regimes in general, please contact one of the authors of this alert at email@example.com or your usual contact at Reed Smith.
Client Alert 2014-241