Sanctions following Russia's recognition of Donetsk and Luhansk regions as independent states and the following invasion of Ukraine


Closeup of glass building
During the night of 23-24 February 2022, Russian troops invaded and opened fire in Ukraine. This followed only two days after Russia recognised Ukrainian regions Donetsk and Luhansk as independent states. Western state leaders condemn these actions.

On 22 February 2022, both the EU and the US announced certain sanctions against Russia following the announcement by Putin of the decision to recognise the so-called Donetsk and Luhansk People's Republics as independent states. Both the EU and the US leaders were clear that such sanctions were merely a first step, and that further sanctions would be issued if the situation escalates. A brief outline of the sanctions currently imposed on follows further below.

The scope of the next level of sanctions is not yet announced, neither from the US nor the EU. President Biden has during the night communicated that he will impose the "full scale" of sanctions against Russia. No official statement on what this involves has been issued, however, it is believed to cover the following:

  • target Russia's two largest banks, Sberbank of Russia (SBER) and VTB, as well as other financial firms

  • export controls to be expanded to cut off Russian access to critical Western technology for all economic sectors in Russia

  • additional members of Putin's inner circle and their families to be added to the list of restricted people

In addition, there are reported discussions on banning Russia from the international payments infrastructure, SWIFT, although this is controversial.

Biden is expected to announce the scope of the new sanctions today, Thursday.

From The EU we are aware that an emergency meeting in the European Council to discuss the situation in Ukraine was already planned for Thursday and we expect further sanctions to be discussed today.

Schjødt is monitoring the situation closely, and our sanctions team has considerable experience with assisting with all matters related to the sanctions against Russia.

The new sanctions currenly imposed

The European Union

New sanctions listings

The EU has targeted 351 members of the State Duma (part of Russia's national legislature) who voted in favour of recognising the independence of Donetsk and Luhansk.

The EU has also targeted 27 persons and entities because of their role in undermining and threatening the territorial integrity, sovereignty and independence of Ukraine. The latter includes political, military, business and financial organizations, including inter alia the following financial institutions:

  • RF.
  • Bank Rossiya

These targeted measures include an asset freeze and a prohibition from making funds available to the listed individuals and entities, including indirectly. This essentially entails a general prohibition from engaging in any form of business dealings/transactions with such entities, save in very limited circumstances. In addition, the listed persons are also subject to travel bans, preventing them from entering or transiting EU territory

Ban on trade between the Donetsk and Luhansk (the two Ukrainian breakaway regions) to and from the EU.

As was done with respect to Crimea in connection with the annexation in 2014, the EU has imposed severe restrictions targeting the trade between the EU and the two Ukrainian breakaway regions, Donetsk and Luhansk. These include inter alia comprehensive import bans, bans on acquisition of real estate and entities, and export restrictions targeting good, technologies and services (financial and technical) related to key business sectors including transport, telecommunications, energy, and the prospecting, exploration and production of oil, gas and mineral resources. There are certain exemptions to these prohibitions, e.g. regarding obligations arising from contracts concluded before 23 February 2022.

Limiting the ability of the Russian state and government to access the EU’s capital and financial markets and services

The new sanctions prohibits the direct or indirect provision of investment services for or assistance in the issuance of, or any other dealing with transferable securities and money-market instruments issued after 9 March 2022:

  • Russia and its Government;

  • The Russian Central Bank; or

  • A legal person, entity or body acting on behalf of, or at the direction of, the Russian Central Bank.

It is prohibited to directly or indirectly make, or be part of any arrangement to make, any new loan or credit to any of the aforementioned legal persons, entities or bodies. This prohibition does, however, not apply to

  • loans or credit that have a specific and documented objective to provide financing for non-prohibited imports or exports of goods and non-financial services between the EU and any third State, including the expenditure for goods and services from another third state that is necessary for executing the export or import contracts.

  • drawdown or disbursements made under a contract concluded before 23 February 2022 subject to certain conditions.

The United States

Major financial institutions

The US financial sanctions imposed on 22 February are targeting Russia's ability to finance aggression in the region, by sanctioning two state-owned financial institutions:

  • Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB), including 25 subsidiaries

  • Promsvyazbank Public Joint Stock Company (PSB), including 17 subsidiaries

The sanctions cover these entities and any entity owned directly or indirectly by 50 % or more by VEB or PSB, even if not on the list of subsidiaries.

The sanctions involve an immediate cut of access for these entities to the US market, and all assets under US jurisdiction were immediately frozen.

US individuals and entities are prohibited from doing business with the sanctioned entities (the Office of Foreign Assets Control (OFAC) may grant exceptions).

Restrictions on Russia's sovereign debt

Further restrictions were imposed on Russia's sovereign debt, by prohibiting participation in the secondary market for bonds issued after 1 March 2022 by:

  • Central Bank of the Russian Federation

  • National Wealth Fund of the Russian Federation

  • Ministry of Finance of the Russian Federation

Elites and families close to Putin

New persons within the Russian elite and families close to Putin are added to the list of blocked persons.

All property and interests in property, as well as any entity owned directly or indirectly by 50 % or more by the named persons that are in the US or in the possession and control of US persons are blocked and must be reported to the OFAC.

Any transactions or other dealings (e.g. provision of funds, goods, services etc.) with these persons or assets by US persons or within the US are prohibited (OFAC may give consent).

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