World ramps up sanctions as Putin’s onslaught on Ukraine begins
With Europe and Ukraine waking to the rumble of war, as Vladimir Putin moves forward with the invasion that he denied was imminent, countries around the world expressed their condemnation, and announced sanctions or the intention to impose them.
Amongst the measures that have been taken or will be are: suspension of the Nordstream2 pipeline from Russia to Germany; asset freezes of major Russian banks; suspension of processing of licences of dual-use goods to Russia; closure of UK airspace to Russian aviation; and sanctions on Russian individuals including oligarchs, military leaders, and those regarded as propagandists for the Putin regime.
However, Russia has still not been removed from the SWIFT banking system, despite some nations – including the US and the UK – supporting that move. Few observers have expressed any great hope that sanctions will have any immediate impact on Russia’s decision to prosecute war in Ukraine.
The following is intended by way of a recap:
United States
On 24 February, President Biden made an address in which he set out further sanctions measures the United States is taking in response to the Russian invasion of Ukraine. The measures include the following:
- ‘Severing of the connection to the U.S. financial system for Russia’s largest financial institution, Sberbank, including 25 subsidiaries, by imposing correspondent and payable-through account sanctions.’
- ‘Full blocking sanctions on Russia’s second largest financial institution, VTB Bank (VTB), including 20 subsidiaries. This action will freeze any of VTB’s assets touching the U.S financial system and prohibit U.S. persons from dealing with them. VTB holds nearly one-fifth of the overall Russian banking sector’s assets, is heavily exposed to the U.S. and western financial systems, and is systemically critical to the Russian financial system.’
- ‘Full blocking sanctions on three other major Russian financial institutions: Bank Otkritie, Sovcombank OJSC, and Novikombank – and 34 subsidiaries. These sanctions freeze any of these institutions’ assets touching the U.S financial system and prohibit U.S. persons from dealing with them. These financial institutions play a significant a role in the Russian economy.’
- ‘New debt and equity restrictions on thirteen of the most critical major Russian enterprises and entities. This includes restrictions on all transactions in, provision of financing for, and other dealings in new debt of greater than 14 days maturity and new equity issued by thirteen Russian state-owned enterprises and entities: Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways. These entities, including companies critical to the Russian economy with estimated assets of nearly $1.4 trillion, will not be able to raise money through the U.S. market – a key source of capital and revenue generation, which limits the Kremlin’s ability to raise money for its activity.’
- ‘Additional full blocking sanctions on Russian elites and their family members: Sergei Ivanov (and his son, Sergei), Nikolai Patrushev (and his son Andrey), Igor Sechin (and his son Ivan), Andrey Puchkov, Yuriy Solviev (and two real estate companies he owns), Galina Ulyutina, and Alexander Vedyakhin. This action includes individuals who have enriched themselves at the expense of the Russian state and have elevated their family members into some of the highest position of powers in the country. It also includes financial figures who sit atop Russia’s largest financial institutions and are responsible for providing the resources necessary to support Putin’s invasion of Ukraine.’
- ‘Costs on Belarus for supporting a further invasion of Ukraine by sanctioning 24 Belarusian individuals and entities, including targeting Belarus’ military and financial capabilities by sanctioning two significant Belarusian state-owned banks, nine defense firms, and seven regime-connected official and elites.’
- ‘[M]easures against military end users, including the Russian Ministry of Defense. Exports of nearly all U.S. items and items produced in foreign countries using certain U.S.-origin software, technology, or equipment will be restricted to targeted military end users. These comprehensive restrictions apply to the Russian Ministry of Defense, including the Armed Forces of Russia, wherever located.’
- ‘Russia-wide restrictions to choke off Russia’s import of technological goods critical to a diversified economy and Putin’s ability to project power. This includes Russia-wide denial of exports of sensitive technology, primarily targeting the Russian defense, aviation, and maritime sectors to cut off Russia’s access to cutting-edge technology. In addition to sweeping restrictions on the Russian-defense sector, the United States government will impose Russia-wide restrictions on sensitive U.S. technologies produced in foreign countries using U.S.-origin software, technology, or equipment. This includes Russia-wide restrictions on semiconductors, telecommunication, encryption security, lasers, sensors, navigation, avionics and maritime technologies. These severe and sustained controls will cut off Russia’s access to cutting edge technology.’
The White House also said that, as ‘historical multilateral cooperation…serves as a force multiplier in restricting more than $50 billion in key inputs to Russia – impacting far more than that in Russia’s production [the United States] will provide an exemption for other countries that adopt equally stringent measures.’
It said, ‘Countries that adopt substantially similar export restrictions are exempted from new U.S. licensing requirements for items produced in their countries. The European Union, Australia, Japan, Canada, New Zealand and the United Kingdom, have already communicated their plans for parallel actions. This unprecedented coordination significantly expands the scope of restrictions on Russia. Further engagement with Allies and partners will continue to maximize the impact on Russia’s military capabilities.’
On 23 February, the White House announced sanctions on the Nord Stream 2 pipeline. This was followed by the US Treasury’s Office of Foreign Assets Control (‘OFAC’) naming Nord Stream 2 AG and its managing director as Specially Designated Nationals (‘SDNs’) pursuant to the Protecting Europe’s Energy Security Act (‘PEESA’) and Executive Order (‘EO’) 14039 of 20 August 2021. OFAC issued General License No. 4 (GL-4) under EO 14039 authorizing US persons to engage in transactions that are ordinarily incident and necessary to the wind down of transactions involving Nord Stream 2 AG and any entity owned 50 percent or more by it, until 2 March 2022.
On 22 February, OFAC named more than 40 entities, five individuals, and five vessels as SDNs under EO 14024 of 15 April 2021. The targets included two banks: Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), issuing GL-2 and GL-3 to permit winding down activities relating to VEB.
Also on 22 February, OFAC issued Directive 1A under EO 14024 prohibiting US financial institutions from participating in the secondary market for bonds issued by Russia’s Central Bank, National Wealth Fund, or Ministry of Finance after March 1, 2022, unless licensed or otherwise authorized by OFAC. Directive 1A updates an earlier directive issued in April 2021 which prohibited US financial institutions from participation in the primary market for bonds issued by, and lending to, those entities.
Links:
See the new export controls imposed against Russia by the Bureau of Industry and Security:
https://public-inspection.federalregister.gov/2022-04300.pdf
24 February OFAC Russia and Belarus related designations:
https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220224
Nordstream2 designation:
https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220223_33
Directive 1a:
https://home.treasury.gov/system/files/126/russia_directive_1a.pdf
White House Executive Order:
BIS export controls:
United Kingdom
On 22 February, the UK government sanctioned five banks, Bank Rossiya; Black Sea Bank for Development and Reconstruction; JSC Genbank; IS Bank; and PJSC Promsvyazbank; and three individuals, Gennadiy Timchenko, Boris Rotenberg; and Igor Rotenberg.
UK prime minister Boris Johnson described the sanctions as ‘the first barrage of what we are prepared to do, and we hold further sanctions at readiness to be deployed alongside the United States and the European Union if the situation escalates still further.’ Johnson was criticised by parliamentarians on both sides of the House of Commons for a sanctions response that failed to match previous rhetoric.
On 24 February, the UK government stepped up its response, announcing ‘comprehensive sanctions covering Russian elites, companies and financial institutions…following Russia’s full-scale invasion of Ukraine.’
In a statement, the UK Foreign Commonwealth and Development Office said that Russian bank assets in UK were to be ‘frozen, totally shutting off its banking system from UK finance markets.’ It also announced that the UK is banning Russian state-owned and key strategic private companies from raising finance on the UK financial markets,’ and
- ‘More than 100 companies and oligarchs at the heart of Putin’s regime hit [have been hit] with sanctions today worth 100s of billions of pounds, asset freezes and travel bans
- ‘punitive new restrictions on trade and export controls against Russia’s hi-tech and strategic industries
- ‘new restrictions to cut off wealthy Russians’ access to UK banks
- ‘the UK is working with allies to exclude Russia from the SWIFT financial system.’
The UK government also said that it would introduce ‘our toughest export controls against Russia – hitting its electronics, telecoms and aerospace companies. And Russia’s flagship airline Aeroflot will be banned from the UK’s airspace.’
It said amongst sanctions targets would be:
- ‘VTB, Russia’s second-largest bank with assets totalling £154bn and 95,000 employees;
- ‘Rostec, Russia’s biggest defence company which exports more than £10bn of arms as year and employs two million people;
- ‘Five of Putin’s inner circle including his ex son-in-law Kirill Shamalov, previously married to his daughter Katarina and Russia’s youngest billionaire;
- ‘Tactical Missile Corporation, Russia’s leading supplier of air and sea missiles which played a leading role in its build up of forces against Ukraine; and
- ‘Uralvagonzavod, one of the world’s largest tank manufacturers.’
Details on the UK’s sanctions programmes are at:
https://www.gov.uk/government/organisations/office-of-financial-sanctions-implementation
European Union
On 23 February the Foreign Affairs Council of the European Union announced that the EU was extending sanctions to cover:
- ‘All the 351 members of the Russian State Duma, who voted on 15 February in favour of the appeal to President Putin to recognise the independence of the self-proclaimed Donetsk and Luhansk “republics”,’
- ‘27 high profile individuals and entities, who have played a role in undermining or threatening the territorial integrity, sovereignty and independence of Ukraine [including] members of the government, who were involved in the illegal decisions; banks and businesspersons/oligarchs supporting financially or materially Russian operations in the Donetsk and Luhansk territories, or benefitting from them; senior military officers, who played a role in the invasion and destabilisation actions; and individuals responsible for leading a disinformation war against Ukraine.’
- ‘Restrictions on economic relations with the non-government controlled areas of the Donetsk and Luhansk oblasts [to] target trade from the two non-government controlled regions to and from the EU, to ensure that those responsible clearly feel the economic consequences of their illegal and aggressive actions.’
It said it would also introduce ‘an import ban on goods from the non-government controlled areas of the Donetsk and Luhansk oblasts, restrictions on trade and investments related to certain economic sectors, a prohibition to supply tourism services, and an export ban for certain goods and technologies.’
See the measures in the EU Official Journal at:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L:2022:042I:TOC
Belgium
On 24 February, the government of the Flemish region of Belgium, announced that ‘Prime Minister Jambon has decided, as a temporary measure, to suspend with immediate effect all current licences for destination or end-use country Russia. This measure is temporary and will be reviewed daily in the light of actual developments.
‘For transactions not requiring a licence, the Strategic Goods Control Department asks for vigilance. Based on Article 4 of Regulation 821/2021 (the dual-use Regulation) read together with the current Russia sanctions (Regulation 833/2014, as amended), any individual export to Russia whose end use may be defence-related production, development or maintenance is subject to a catch-all license requirement. Thus, these transactions may not take place without a licence from the Strategic Goods Control Authority.’
WorldECR understands that the other Belgian regions (Wallonia and Brussels) are or have taken similar steps.
Canada
On 22 February, the Canadian government announced that it was imposing new sanctions in response to Russia’s invasion of Ukraine ‘effective immediately’.
It said: ‘The new amendments impose restrictions on 31 individuals who are key members of President Putin’s inner circle, close contacts and family members of some individuals already sanctioned by Canada, and 27 key financial institutions. Additionally, the measures impose restrictions against 4 Ukrainian individuals who are pro-Russian agents of disinformation.
‘These amendments also impose a dealings ban on the non-government controlled areas of Donetsk and Luhansk, which will effectively prohibit Canadians from engaging in specific transactions and activities in these regions. In addition, the amendments will include 351 members of the Russian State Duma who voted for the decision to recognize the independence of the so-called DNR and LNR, as well as new prohibitions in the area of sovereign debt, specifically prohibiting direct or indirect dealings with three central Russian entities, and impose sanctions on two significant financial entities. It is now prohibited for any person in Canada and any Canadian outside Canada to directly or indirectly transact in, provide financing for or otherwise deal in new Russian debt.’
Australia
On 23 February, the Australian government imposed sanctions consonant with the decisions of its allies, with Foreign Affairs Minister Marise Payne and Prime Minister Scott Morrison stating that, ‘Under a first phase, we will impose travel bans and targeted financial sanctions on eight members of Russia’s Security Council.’
They said that the government was sanctioning Rossiya Bank, Promsvyazbank, IS Bank, Genbank and the Black Sea Bank for Development and Reconstruction, ‘in addition to restrictions on Australians investing in the state development bank VEB.’
Also, the statement added that there would be amendments to the Autonomous Sanctions Regulations 2011 ’to extend existing sanctions that apply to Crimea and Sevastopol to Donetsk and Luhansk’ and to ‘significantly broaden the scope of people and entities that Australia can list for sanctions to include those of “strategic and economic significance to Russia”.’
It also announced that ‘All Ukrainian nationals in Australia with a visa that is due to expire up to 30 June, will be given an automatic extension for six months,’ while ‘outstanding visa applications from Ukrainian citizens, which number approximately 430, will be prioritised and fast tracked for a decision by immigration officials, as soon as possible.’
Japan
Japan has indicated that it will take measures, though without, as at writing time, providing details. However, following a 25 February meetin with the National Security Council, Prime Minister Fumio Kishida said: ‘The invasion by Russia that just occurred undermines the roots of the international order; we will not accept a unilateral change to the status quo by force or coercion. We strongly condemn Russia and will deal with this issue swiftly in cooperation with the United States and other members of the international community,’ adding, ‘We will respond in cooperation with the international community. We will consider future responses in concrete terms after assessing the situation of relevant countries and thoroughly establishing effective communication and contacts with them.’
China
All eyes will, however, now turn to China, which has recently signalled its desire to strengthen a strategic partnership with Russia and may represent a willing market for Russian oil and gas should Europe close its doors. To date, Chinese statements on the situation will do little to reassure the western alliance.’ At a 24 February press briefing, government spokesperson Hua Chunying said: ‘We have stated China’s principled position on the Ukraine issue. There is a complex historical background and context on this issue. The current situation is the result of the interplay of various factors. We noted that today Russia announced its launch of a special military operation in eastern Ukraine. Russia’s defense ministry said that its armed forces will not conduct missile, air or artillery strikes on cities. China is closely monitoring the latest developments and calls on all sides to exercise restraint and prevent the situation from getting out of control.’
She added, ‘I must also stress that China-Russia relations are based on the foundation of non-alliance, non-confrontation and non-targeting of any third party. This differs fundamentally and essentially from the practice of the US, which is, ganging up to form small cliques and pursuing bloc politics to create confrontation and division based on ideology. China has no interest in the friend-or-foe dichotomous Cold War thinking and the patchwork of so-called allies and small cliques and has no intention to follow such a path.’
