New rounds of EU sanctions against Russia have entered into force

Over the weekend and today, the latest round of European Union (“EU”) sanctions entered into force following Russia’s continued military incursion into Ukraine. Danish companies should take action to ensure that they are in compliance with the new sanctions and keep monitoring the situation as new rounds of sanctions are expected soon.

New rounds of EU sanctions against Russia

Following Russia’s continued military incursions into Ukraine, the EU member states have imposed additional export restrictions on dual-use products, as well as on advanced technology products. The new rules also further limit access for certain Russian financial institutions and companies to the capital market and add a number of new entities to the sanctions list. Additionally, the sanctions impose target the Russian oil sector as well as the air and space industry.

The sanctions also prevent any Russian aircraft from landing in, taking off from, or overflying, the territory of the Union as well as prohibiting any transactions with the Central Bank of Russia.

The second round of sanctions were published in the Official Journal of the European Union over the weekend and today and have now entered into force. The second round of EU sanctions consists of three different EU regulations that can be found here, here and here.

The new EU set of sanctions does not yet include wide sanctions on major sectors like the Russian energy sector.

Asset freezes

Regulation 2022/332[1] adds a number of additional individuals and entities to the listed persons under the existing Regulation 269/2014, which imposes assets freeze. Danish companies must ensure that they do not deal directly or indirectly with the newly added individuals and entities or entities owned or controlled by them. The list of relevant new individuals and entities can be found here (starting on page 4). Danish companies dealing with Russia should make sure to screen their business partners against this list. A complete overview of the new sanctions list can be compiled by comparing the five recent council decisions here.

Sanctions related to financial restrictions

Regulation 2022/328[2] expands the existing financial restrictions, in particular those on access by certain Russian entities to the EU capital markets. It also prohibits the listing and provision of services in relation to shares of Russian state-owned entities on Union trading venues as of 12 April 2022. In addition, it introduces new measures which significantly limit the financial inflows from Russia to the Union by prohibiting the acceptance of deposits exceeding certain values from Russian nationals or residents, the holding of accounts of Russian clients by the Union central securities depositories as well as the selling of euro-denominated securities to Russian clients as of 26 February 2022.

Sanctions related to dual-use products

The scope on the current restrictions on the export of dual-use products into Russia has also been expanded greatly with regulation 2022/328. The regulation imposes a comprehensive export ban on dual-use goods and technology to any person, entity or body in Russia or for use in Russia. Certain specific, limited exemptions are available, if those items are for non-military use or for non-military end-users. It also bans the sale of such goods and technology to specified legal persons in Russia and prohibits the provision of brokering, technical assistance and other related services as well as financing and financial assistance related to such goods and technology. The Danish Business Authority may authorise the sale, supply, transfer or export of dual-use goods and technology for non-military use and to non-military end-users if the relevant contracts were concluded before 26 February 2022 on the condition that authorisation is requested before 1 May 2022. Further, the Danish Business Authority may similarly authorise export intended for the exclusive use of entities owned, or solely or jointly controlled by a company incorporated in an EU member state or in the USA.

Sanctions related to Russian access to EU airspace and Central Bank of Russia

With regulation 2022/334[3] which was published today, the EU introduces a ban on all Russian controlled aircraft from landing in, taking off from or overflying the territory of the Union, unless it is for humanitarian purposes or for any other purpose consistent with the regulation. An aircraft is considered to be Russian if it is registered as a Russian aircraft, or if it is owned or chartered, or otherwise controlled by any Russian natural or legal person, entity or body. The regulation also prohibits transactions, management of reserves and assets in relation to the Central Bank of Russia. Such dealings may only be authorised by the competent authorities if they are considered strictly necessary. The regulation can be found here.

The EU Commission has, along with the leaders of the United Kingdom, Canada, and the United States, agreed to ensure that certain Russian banks are removed from the SWIFT messaging system. Such measures have not yet entered into force as of the time of publication of this newsletter and the list of relevant banks is not yet known.

Additionally, other countries have imposed further sanctions on Russia, including the United Kingdom and the United States. On 24 February 2022, the United Kingdom imposed restrictions on transactions with the Central Bank of the Russian Federation, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation. The United Kingdom also severely limited certain Russian banks from accessing the pound sterling, as well as making the same banks unable to transfer funds through the United Kingdom[4].

On 25 February 2022, the United States also imposed sanctions, including assets freeze on Sberbank and VTB Bank which are two of Russia’s largest financial institutions. Furthermore, the United States also introduces sanctions on other major Russian financial institutions.[5] The United States has also announced on 28 February 2022[6] that all transactions by United States persons with the Central Bank of Russia have been restricted.

Impact on Danish companies

On this basis, Danish companies should take actions to ensure that they are not in any way directly or indirectly involved in businesses with the newly sanctioned individuals and entities. Danish companies should also ensure that their sanctions compliance programs, policies and screening processes are updated to ensure that the newly enacted sanctions are addressed, in particular in regards to dual-use products. All products exported to Russia must be screened against the dual-use list as well as the new regulations. The situation must be monitored closely in order to ensure compliance with the potential wider sets of sanctions which may be imposed at short notice.

Gorrissen Federspiel closely follows the developments in the sanctions against Russia and can assist with the implementation of measures to ensure that sanctions are observed. If you have any questions, please contact a member of our CSR and Compliance team.

For more information on the first EU sanctions package, please see Gorrissen Federspiels newsletter of 24 February 2022 by accessing the following link.