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Impact of the EU’s Russia/Ukraine Sanctions on Irish Transactions

The EU’s Russia/Ukraine sanctions regime is part of the EU’s foreign policy response to Russia’s continuing aggression against Ukraine. The EU’s sanctions regime was dramatically expanded during 2022 with nine additional packages.

These sanctions apply within the territory of the EU, to EU nationals in any location, to companies and organisations incorporated in a Member State, and on board aircraft or vessels under a Member States’ jurisdiction. In Ireland, a person who is guilty of an offence under these regulations can be subject to both a fine and imprisonment.

Although the framework of the EU’s Russian sanctions regime has been in place since 2014, most restrictive measures were adopted during the course of 2022. The adoption of nine additional packages in less than 12 months has made tracking the evolving sanctions landscape challenging, particularly when assessing the possible implications for business and transactions conducted in Ireland where a Russian nexus occurs only tangentially.

In 2022, we advised numerous clients on their obligations and responsibilities under EU sanctions regulations. In some cases, sanctions are directly applicable to the core parties and/or business activities, and the need for a sanctions review is obvious. However, some transactions which on the surface concern exclusively Irish/EU interests have been shown to require careful review based on, for example, a Russian entity which is a member of the wider company group, or an ultimate beneficial owner who is individually designated.

EU adopts ninth package of sanctions against Russia

The EU adopted its ninth package of Russia/Ukraine sanctions in mid-December 2022. The nine packages adopted last year build on the sanctions imposed since 2014, following the illegal annexation of Crimea and Sevastopol. The most recent package includes a range of measures designed to increase pressure on Russia and its government.

Scope of the ninth package

Expanded import and export prohibitions

The EU’s main sanctions instrument concerning Russia’s aggression in Ukraine which prohibits/restricts trade in certain goods and services with Russia is Council Regulation (EU) No 833/2014. This package further expands the scope of import and export prohibitions under Council Regulation (EU) No 833/2014. The new additions include:

  • Expanded export ban covering goods and technology suited for use in aviation and the space industry to include aircraft engines and their parts, with certain new derogations
  • Prohibitions extended to items which could enhance Russian industrial capacities, such as generators, toy drones, laptops, hard drives, IT components, night-vision and radio-navigation equipment, cameras and lenses
  • Further entries to the list set out in Annex IV, i.e. the list of entities subject to tighter export restrictions regarding dual-use goods and technology

It also introduces a general ground for derogation for the divestment or wind-down of business activities in Russia, provided certain conditions are met.

Asset freeze measures

The EU’s main sanctions instrument imposing asset freezes on designated natural and legal persons in connection with Russia’s aggression in Ukraine is Council Regulation (EU) No 269/2014. The ninth package of sanctions saw a further 141 individuals and 49 legal entities added as designated persons under Council Regulation (EU) No 269/2014. These include Credit Bank of Moscow and JSC Dalnevostochniy. These restrictions now apply to 1386 individuals and 171 entities. Those designated under this regulation are subject to an asset freeze and prohibition on funds or economic resources being made available to them. Designated natural persons are also subject to an EU travel ban, which is legislated for at Member State level.

New derogations subject to authorisation by the relevant competent authority were also introduced. These include derogations from the asset freeze on:

  • Sberbank concerning the ongoing sale and transfer of proprietary rights directly or indirectly owned by Sberbank in an EU entity
  • Credit Bank of Moscow and JSC ‘Dalnevostochniy Bank’, where necessary for the termination by 17 June 2023 of operations, contracts, or other agreements, including correspondent banking relations, concluded with those entities before 16 December 2022
  • Certain listed Russian banks, where necessary for the purchase, import or transport of agricultural and food products, including wheat and fertilisers
  • Natural persons listed in Annex I who held a significant role in international trade in agricultural and food products prior to their listing, in order to address food security

Sectoral sanctions

A range of measures extending sectoral sanctions has also been introduced:

  • New prohibitions targeting investment in the mining sector, following the existing measures targeting new investment in the energy sector
  • Russian Regional Development Bank added to the list of Russian State-owned or controlled entities that are subject to the transaction ban
  • Expanded suspension of the broadcasting licenses of Russian media outlets under the permanent control of the Russian leadership
  • New prohibitions on the provision of advertising, market research and public opinion polling services, as well as product testing and technical inspection services

Looking forward

With no end to the war in sight, the expectation is that the EU will continue to develop and refine its Russian sanctions regime. Keeping abreast of changes to both the regulation and the EU’s associated guidance and best practices is key to understanding and complying in full with the measures.

The key takeaway from our experience with sanctions regimes in 2022 is to guard against complacency. There are a wide range of restrictive measures, which change frequently and have a long reach. Hidden sanctions issues can derail entire transactions in seemingly innocuous circumstances, and have serious criminal implications for those in breach.

For more information and expert advice in navigating the ever-evolving regulations, contact a member of our Debt Capital Markets & Listing team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.



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