Significant tightening of EU economic sanctions against Russia

Restrictive measures in connection with the crisis in Ukraine were already put into effect by the European Union in March 2014. These essentially concerned travel restrictions and the freezing of accounts of certain people and companies. Following the increasing duration of the conflict, this list has now been extended. Investment and trade restrictions were recently imposed, which were, however, limited to the territory of Crimea and Sevastopol.

Sanctions which are considerably more comprehensive have now come into force effective 1 August 2014. These relate for the first time directly to Russia and no longer to individual persons or Ukrainian territory. The measures concerned are Regulation No 833/2014 of the Council and Council Decision 2014/512/CFSP.

The restrictive measures essentially concern the following sectors:

1. Arms
The export to or import from Russia of arms and related materials of all types including weapons and ammunition, military vehicles and equipment, paramilitary equipment and relevant spare parts is prohibited. The provision of technical assistance and brokering services or financing and financial assistance are likewise prohibited.

2. Dual-use goods
The Regulation prohibits the sale of dual-use goods to natural persons or legal entities in Russia or for use in Russia if these goods are or could be intended for military purposes or military end users. If the end users are the Russian armed forces, all dual-use goods procured by these are deemed as being for military purposes.
An authorisation for the export of other dual-use goods will not be granted either if there are sufficient grounds to believe that the end user might be the armed forces or that the goods could have a military end-use.

3. Deep sea and Arctic oil exploration and production
The Regulation contains a list of goods which might be used for deep sea and Arctic oil exploration and production and shale oil projects in Russia. Such goods may only be sold with prior authorisation. The competent authorities will not grant authorisation if they have sufficient grounds to believe that the goods are to be used for such projects.

4. Securities and money-market instruments
Access to capital markets is restricted for certain financial institutions specified in the Regulation. Transferable securities and money-market instruments with a maturity exceeding 90 days, which were issued after 1 August 2014, may not be traded if they were put into circulation by such a financial institution. This also applies for certain organisations affiliated to them. The financial institutions explicitly specified are SBERBANK, VTB BANK, GAZPROMBANK, VNESHECONOMBANK (VEB) and ROSSELKHOZBANK.

Exceptions are possible – Expert advice necessary

The Regulation of contains certain exceptions which make it possible to fulfil contracts or agreements entered into before 1 August 2014 or to obtain authorisation for these at the discretion of the competent authority.

The infringement of the sanctions provisions can be punished with high fine and imprisonment. Companies whose Russian business comes into contact with these sectors should therefore obtain expert advice before carrying out such transactions.