Highlights of sanctions announced by major world powers
Published on March 3, 2022
In response to the Russian invasion of Ukraine, the United States, the European Union, and other major world powers have announced various punitive actions against Russia. Several sanctions and embargoes were already in place against Russia, and the invasion triggered additional sanctions from major world powers. Recent actions include sweeping financial sanctions and stringent export controls that will have profound impact on Russia’s economy, financial system, and access to cutting-edge technology. The unprecedented export control measures will cut off more than half of Russia’s high-tech imports, restricting Russia’s access to vital technological inputs, atrophying its industrial base, and undercutting Russia’s strategic ambitions to exert influence on the world stage. The sanctions measures impose severe costs on Russia’s largest financial institutions and will further isolate Russia from the global financial system.
On 24 February, the U.S announced sanctions that target the principal infrastructure of the Russian financial system. These actions through the Office of Foreign Assets Control (OFAC) include measures against all of Russia’s largest financial institutions and the ability of state-owned and private entities to raise capital. These will prevent Russian participation in the global financial system. The actions also target nearly 80 percent of all banking assets in Russia and are aimed at imposing a deep and long-lasting negative effect on the Russian economy and financial system. Institutions (and their subsidiaries) targeted include:
Two of Russia’s largest financial institutions namely The Public Joint Stock Company Sberbank of Russia (Sberbank) and The VTB Bank Public Joint Stock Company (VTB Bank). These two banks in combination make up more than half of the total banking system in Russia by asset value. They will now be unable to use the efficiency, and security of the U.S. financial system.
OFAC has also imposed blocking sanctions on three additional major Russian financial institutions: Otkritie, Novikom, and Sovcom. These three financial institutions hold combined assets worth $80 billion, and the blocking will restrict the Russian financial services sector and diminish the ability of other critical Russian economic sectors from accessing global markets, attracting investment, and utilizing the U.S. dollar.
Debt and Equity Prohibitions against thirteen state-owned and private entities (Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways) will prohibit transactions and dealings by U.S. persons or within the United States in new debt of longer than 14 days maturity and new equity. This will restrict them from raising money through the U.S. market which is a primary source of capital and revenue generation.
In addition, several individuals related to persons in President Putin’s immediate circle have also been placed under sanctions to restrict them from moving assets around the world that could support Russian actions.
U.S General Licenses: It is noteworthy that OFAC has also issued several general licenses in connection with these actions. These Licenses aims to mitigate the challenges high energy prices pose to average citizens and therefore, does not prevent banks from processing payments for them.
Japan has joined the U.S., Canada, and the EU in announcing sanctions on Russia. They include:
Asset freezes targeting three financial entities namely Promsvyazbank, Bank Rossiya and Russia's economic development bank VEB. However, the country's largest financial institution Sberbank, which is on the U.S. sanctions list, is not included.
Controls on exports of products on internationally agreed list and high-tech products such as semiconductors to Russian military-related entities.
Suspension of the issuance of entry visas to Japan for designated individuals related to Russia and freezing the assets held by designated individuals and entities related to Russia in Japan.
In a meeting on Thursday, 24 February, European Union leaders have agreed to a second set of sanctions against Russia. The first set of sanctions were announced following the Russian decision to recognise the Ukrainian regions of Donetsk and Luhansk as independent entities. European Union Commission President Ursula von der Leyen said that the second set of sanctions will include measures that will:
Restrict the activities of the financial sector, energy, and transport sectors
Apply additional controls on the export of dual-use goods to Russia
Impose controls on export financing
Enact additional sanctions against Russian individuals
Australia imposes autonomous sanctions in relation to Russia in response to the Russian threat to the sovereignty and territorial integrity of Ukraine. They were first imposed in 2014 and extended in 2015 and 2022. Australia has said that the following measures will be applied:
Under a first phase, impose travel bans and targeted financial sanctions on eight members of Russia’s Security Council. The Council bears responsibility for the current phase of the invasion by providing policy advice and justification to President Putin’s unilateral declaration recognising the so-called Donetsk People's Republic and the Luhansk People's Republic.
Targeted financial sanctions that will that Australian individuals and entities cannot do business with the Rossiya Bank, Promsvyazbank, IS Bank, Genbank and the Black Sea Bank for Development and Reconstruction. This is in addition to restrictions on Australians investing in the state development bank VEB.
The Autonomous Sanctions Regulations 2011 will be extended to impose strong economic sanctions in the regions of Donetsk and Luhansk prohibiting trade in the transport, energy, telecommunications, and oil, gas and minerals sectors.
The Office of Financial Sanctions implementation has announced that:
In addition to IS BANK and JOINT STOCK COMPANY GENBANK, 11 entries have been added to the consolidated list and are now subject to an asset freeze.
Several individuals have been added to the list of Asset Freeze Targets.
Other announcements made by the Prime Minister are yet to implemented by the Office of Financial Sanctions Implementation.
Asset freeze on some major Russian banks, including state-owned VTB, its second-biggest bank, and stop major Russian companies from raising finance in Britain.
Ban Russia's flagship airline Aeroflot from landing in Britain.
Suspend dual export licences to Russia and ban exports of some high-tech exports and parts of the extractive industry.
Disclaimer: This communication is provided by CATTS BV for educational and informational purposes only and does not constitute the rendering of professional advice, consulting services or of legal counsel. The content of this communication represents the opinion of the author(s) based on a current state of knowledge at the time of publication, and is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the authors endeavour to ensure that the contents of each article presented in this forum represent the facts known as of the date of publication, we make no claim of accuracy nor will we update articles for subsequent changes or modifications to the law and regulations, or to reflect judicial and administrative interpretations thereof. This communication is not intended to, nor shall it be construed to, represent an official position of CATTS BV. We do not assume legal liability for the accuracy, completeness or validity of the information contained herein. No one should act on such information without appropriate professional advice after a thorough examination of their particular situation.