EU began imposing sanctions in March 2014 along with the sanctions imposed by the United States.
Thus, in March, the EU introduced measures to restrict the travel and freeze the assets of individuals and entities responsible for actions undermining or threatening the sovereignty of the Ukraine (Council Regulation (EU) No 269/2014 as subsequently amended).
As in the United States, the EU has imposed restrictions on financial dealings with certain named entities operating in the Russian financial and defense industries. While these restrictions fall short of an absolute prohibition on dealings with such entities, they do place substantial limitations on transactions involving transferable securities and money market instruments when issued by them.
The term “Transferable securities” is widely defined and includes shares in companies; other securities equivalent to shares in companies, partnerships or other entities; and bonds or other forms of securitized debt, such as depositary receipts. In addition, any securities giving the right to acquire or sell any such instrument are covered. Similarly, “money market instruments” includes classes of instruments that are normally dealt in on the money market, particularly treasury bills, certificates of deposit and commercial papers.
The first restrictions targeting financial institutions were introduced in July 2014. At that time, it was prohibited to deal with transferable securities and money market instruments with a maturity exceeding 90 days when issued by the listed institution (Annex III). The existing EU sanctions relating to certain transferable securities and money-market instruments have been subsequently extended to cover shorter-term instruments; now, such transferable securities and money-market instruments with a maturity exceeding 30 days issued after 12 September 2014 are covered as well.
Furthermore, the EU ban relating to these new shorter-term transferable securities and money-market instruments has been expanded to target – in addition to the mentioned five Russian banks and their affiliates – six listed Russian defense and energy companies along with certain affiliates
With respect to the eleven listed Russian entities (i.e. the five listed banks and six listed defense and energy companies) and their affiliates, a new EU ban was also introduced to prohibit directly or indirectly making or being part of any arrangement to make new loans or credit with a maturity exceeding 30 days to them after 12 September 2014. The sanctions do not apply if the loans/credit have the following specific and documented objectives: either they relate to non-prohibited trade of goods and EU-Russia non-financial services or they are emergency funding to meet solvability/liquidity criteria for EU entities that are majority owned by the listed Russian banks (similar wording implemented in the Swiss Ordinance).
Expanding on the EU ban on direct or indirect EU sale, supply, transfer or export of key energy related equipment and technology (listed in Annex II to Regulation 833/2014) for use in deep water oil exploration and production, Arctic oil exploration and production, and shale oil projects in Russia, the EU is now prohibiting direct or indirect provision of certain services required for such projects. The associated services that are now prohibited are:
- Well testing
- Logging and completion services; and
- Supply of specialized floating vessels.
Exemptions apply, however, to the execution of an obligation arising from a contractor framework agreement concluded before 12 September 2014 (or ancillary contracts required for the execution of such contracts), as well as when the services relate to urgent activities to protect public health or safety, or the environment. It is notable that none of the above services (nor other concepts, such as deep water) are defined in the EU Regulations.
Arms and Dual-Use Items
Regulation 960/2014 also extends existing EU sanctions measures which impose a ban on direct or indirect sale, supply, transport or export of so-called dual-use goods and technology (as listed in Regulation 428/2009)7 to parties in or for use in Russia when such items are or may be intended for military use or for military end-users. This ban has been broadened to cover nine Russian companies (listed in Annex IV to amended Regulation 833/2014).