UK Announces First Sanctions Targeting Russian Banks and Oligarchs after Russia Enters Ukraine’s Donetsk and Luhansk Regions

On February 22, 2022, UK Prime Minister Boris Johnson announced the designation of five Russian banks and three high net worth individuals under the recently expanded Russia (Sanctions) (EU Exit) Regulations 2019 (see our previous blog post on the UK’s expanded sanctions powers here). The announcement follows the Russian government’s recognition of the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) and placement of Russian military forces in those territories for purported peacekeeping operations. The sanctions target Russian banks and high net worth individuals involved in the destabilization of Ukraine or in obtaining a benefit from, or supporting, the Government of Russia.  All three individuals and four of the five banks (with the exception of PJSC Promsvyazbank) already were sanctioned by the United States. The UK measures, which took effect immediately upon their announcement, impose asset freezes and prohibitions on making funds or economic resources available to – or for the benefit of – designated persons.  The designated individuals also are subject to UK travel bans. The five Russian banks targeted are:

• Bank Rossiya;
• Black Sea Bank for Development and Reconstruction;
• JSC Genbank;
• IS Bank; and
• PJSC Promsvyazbank.

The three individuals targeted are:

• Gennadiy Timchenko;
• Boris Rotenberg; and
• Igor Rotenberg.

The prohibition on dealing with the funds or economic resources of the eight designated persons also extends to any legal entities they own or control, directly or indirectly, even if the particular entity is not itself listed by the UK as a designated person. The test for “ownership or control” in this context is whether (1) the designated person, directly or indirectly, owns 50% or more of the shares or voting rights of the entity or has the right to appoint or remove a majority of the entity’s board of directors or (2) it is reasonable to expect the designated person would be able to ensure that the affairs of the entity are conducted in accordance with their wishes. The UK measures apply to all persons within the territory and territorial sea of the UK and to all UK persons, wherever they are in the world.  This means that all:

• individuals and legal entities who are within, or undertake activities within, the UK’s territory must comply with the newly imposed measures; and
• UK nationals and legal entities established under UK law, including their branches, must also comply with the measures irrespective of where their activities take place.

In announcing the measures, Prime Minister Johnson stated that today’s sanctions were “the first tranche, the first barrage, of what [the UK is] prepared to do: we will hold further sanctions at readiness, to be deployed alongside the United States and the European Union if the situation escalates still further.” In a press release issued after the announcement of today’s sanctions measures, UK Foreign Secretary Liz Truss emphasized that this initial wave of sanctions was intended to “hit oligarchs and banks close to the Kremlin. It sends a clear message that the UK will use our economic heft to inflict pain on Russia and degrade their strategic interests.”  Foreign Secretary Truss also underlined the UK’s willingness to “go much further if Russia does not pull back from the brink . . . curtail[ing] the ability of the Russian state and Russian companies to raise funds in [UK] markets, prohibit[ing] a range of high tech exports, and further isolate[ing] Russian banks from the global economy.” Foreign Secretary Truss’ press release went on to state that the UK will also:

• sanction those members of the Russian Duma and Federation Council who voted to recognize the independence of the so-called DNR and LNR;
• extend the territorial sanctions imposed on Crimea to non-government controlled territory in the so-called DNR and LNR over the coming weeks, preventing UK individuals and businesses from dealing with these territories until they are returned to Ukrainian control; and
• implement a wide ranging set of sanctions measures targeting the Russian financial sector and trade in the event of further aggressive acts by Russia against Ukraine. As part of this package of measures the UK will shortly introduce legislation to prevent Russia from issuing sovereign debt on UK markets should Russia not de-escalate.

For more information on how these developments could impact your organization, contact the author of this post, Alexandra Melia, in Steptoe’s Economic Sanctions team in London. For more information on recently announced US sanctions, see this Steptoe blog post. Visit this link to sign up to receive a recording of Steptoe’s recent webinar “Possible Sanctions Against Russia: What You Need to Know.”