Sanctions Update: UK, US and EU set to impose further and more significant sanctions on Russia following 'full-scale invasion' of Ukraine on 24 February 2022

The UK, US, EU and a number of other countries have already taken a number of measures in response to the conflict, including imposing financial sanctions on a limited group of individuals and entities, in addition to Germany refusing to certify Nord Stream 2. Please see our previous article available here for details of these restrictions and further background on the lead-up to the conflict.

The implication from the initial salvo of financial sanctions was that should Russia choose further military aggression then a much more significant range of economic sanctions and trade restrictions would be implemented.

In the case of the UK, the initial scope of new sanctions announced was relatively constrained, while the EU took a broader approach – targeting a greater number of Russian individuals and entities. Now that a full invasion is in the process of taking place, the UK, US and EU have made it clear that they will respond accordingly in the form of increased supplies of military equipment, the deployment of additional forces in nearby countries and the imposition of a far broader range of economic sanctions and export controls.

Although military action has effectively been ruled out by NATO and other parties (other than in the face of direct military aggression against a NATO member), the US is purportedly considering using cyber weapons to disrupt Russia's military advances (which in turn could lead to further similar Russian reprisals against targets in the UK, Europe and the US).

There is a significant amount of uncertainty following the launching of the "full-scale invasion" by Russia. Here are some additional steps taken by major international stakeholders on Thursday 24 February – many of which have been coordinated through the G7:

UK

• Early on the morning of 24 February, Junior UK Foreign Minister, James Cleverly, informed the British media that the UK would bring forward an unprecedented and coordinated sanctions package and that more sanctions would be announced in waves over the course of the coming few days. This announcement was followed-up by an address to the nation by the UK's Prime Minister, Boris Johnson, who stated that "a massive package of economic sanctions designed in time to hobble the Russian economy" would be introduced.
• On Thursday evening, the Prime Minister subsequently announced a new package of sanctions before Parliament. In summary this included:
• A full asset freeze on VTB, Russia’s second largest bank in addition a number of other major banks;
• Major Russian banks being excluded from the UK's financial system;
• Russian state and private companies being prohibited from raising money in the UK;
• A new UK power to prevent designated banks from accessing Sterling and clearing payments through the UK (similar to the power the US already has);
• Limiting the amount of money Russians can have in British bank accounts;
• Asset freezes extending to around 120 more people and entities, including Russia's largest defence company, Rostec;
• Aeroflot being banned from operating in the UK (with the Transport Secretary, Grant Shapps, later confirming that all Russian airlines had been banned from entering UK airspace and/or landing in the UK); and
• Further export controls being implemented, with a focus on high-end and critical technical equipment and components in sectors including electronics, telecommunications, and aerospace.

Although some of these restrictions came into force immediately, further legislation is expected to be laid before Parliament next week. The Prime Minister also stated that Vladimir Putin may face war crimes charges. Similar financial sanctions will be extended to Belarus for its role in the assault on Ukraine.

The Office of Financial Sanctions Implementation notices are available here, along with current list of Russian designated persons. This page is expected to be updated regularly over the coming days and weeks.

EU

• The European Commission President announced that the EU leaders would be presented with a "a package of massive and targeted sanctions" for approval, aiming to target strategic sectors of the Russian economy by blocking their access to key technologies and markets. It was added that the EU would also seek to "freeze Russian assets in the EU and stop the access of Russian banks to the European financial market." EU leaders also called for further sanctions against Belarus for its role in supporting Russia's invasion of Ukraine.
• In the early hours of the morning of 25 February 2022, the EU agreed on financial sanctions to target Russia's access to capital markets, sanctions on key-state owned companies, an export ban on components for Russia's oil sector, the ban of the sale of all aircrafts, spare parts and equipment to Russian airlines and limiting overall access to semiconductors and other types of cutting-edge technologies.

At the time of publication, the full list of new EU sanctions has not yet been released (however they are expected to be available here for review).

US

• The US President, Joe Biden, vowed that the world would hold Russia accountable, and the White House released a statement saying that the G7 had agreed to move forward on "devastating packages of sanctions".
• In a sign of the coordinated approach being taken, the US President announced similar measures to those implemented by the UK including, limiting Russia's ability to do business in dollars, sanctioning additional entities and individuals (including VTB) and emphasising the importance of restricting critical technological exports. The US President also affirmed that the US would defend every inch of NATO with the full force of American power.

The US treasury's announcement is available here. 

Vladimir Putin’s stated goal is the “demilitarisation" and "denazification" of Ukraine. While Russia's military aims are far from transparent, the Russian operations to date appear to go significantly beyond securing (or even expanding) the pro-Russian separatist-controlled areas of Ukraine in the Donetsk and Luhansk and may well lead to a protracted conflict in the region. At the time of publication, Ukrainian officials have stated they expect a Russian attack on Kyiv later on Friday 25 February.

What this means is that any new economic sanctions or other trade restrictions which are implemented will likely remain in place for the foreseeable future.

For now, Russia has not been banned from the Society for Worldwide Interbank Financial Telecommunication ("SWIFT") global payments system.

This is an additional measure that may be taken. It has been reported that the UK is in favour of the immediate banning of Russia from the payments system, however at this point in time other major international stakeholders such as Germany have not been persuaded – and may wish to leave further counter measures on the negotiating table.

Businesses, projects and transactions that are connected with either Russia, Ukraine and/or the Donetsk and Luhansk regions of Ukraine should carefully monitor these developments as they unfold.