Overview
On June 22, 2015, the EU Foreign Affairs Council agreed to extend the sanctions currently in place against Russia. As we have previously advised, the EU first imposed sanctions against Russia’s defense, energy, and financial sectors in July 2014, in response to Russia’s destabilizing role in eastern Ukraine, and imposed additional sanctions in September 2014, with modest extensions and clarifications in December 2014. The sanctions, which were due to expire on July 31, 2015, have been extended for another six months, to January 31, 2016, to align with the Minsk agreements’ deadline of December 31, 2015.
At the same meeting, the Council extended the EU ban on investment in Crimea for an additional year.
The extended deadlines will be stated in the amended Council Decision/Regulation which will be published shortly in the Official Journal.
EU and US Consider Additional Sanctions
Following the 41st G7 summit held on June 7 and 8, 2015, the leaders jointly stated that they “... stand ready to take further restrictive measures in order to increase the cost on Russia should its actions so require,” and they “recall that the duration of sanctions should be clearly linked to Russia's complete implementation of the Minsk agreements and respect for Ukraine's sovereignty.”
According to the Associated Press, the EU and US are prepared to impose further sanctions on Russia in response to developments on the ground in eastern Ukraine. Officials stated that new measures could include placing more Russian government officials and businessmen on restrictive measures lists, with accompanying asset freezes and travel bans, and curtailing international deals with Russian businesses. There also could be an expanded focus on Russia’s energy sector, possibly including restrictions on fuel exports, natural gas exploration, and equipment for drilling and transporting “tight oil.” Furthermore, there is a suggestion that some Russian banks will be cut off from the SWIFT system, similar to the sanctions deployed by the US against Iran.
American officials also raised the possibility of expanding sanctions to cover the Russian mining and engineering sectors, and “hitting Russian subsidiaries overseas.” This latter point regarding “Russian subsidiaries” is not clear. It could be a reference to applying US sanctions to Russian subsidiaries of US persons, as US sanctions currently apply only to US persons and their foreign branches, but not to foreign-incorporated subsidiaries. Alternatively, it could be a reference to specifically targeting subsidiaries of sanctioned Russian persons. Such subsidiaries automatically are subject to sanctions to the extent they are 50 percent or greater owned by sanctioned persons, but for the most part have not been designated specifically in their own right to date.
The decision whether to introduce the new sanctions described in the Associated Press article will depend on developments in eastern Ukraine.
Conclusion
The EU has made it clear that sanctions are being extended against Russia, and companies ought to be aware of the possibility of further, more significant sanctions being imposed against Russia by the EU and the US in the future.
We will continue to keep you apprised of developments related to EU and US sanctions against Russia and Crimea. You can also follow us on Twitter (@SteptoeIntlReg).
