Worldwide: Ongoing analysis of the global impact of Russia sanctions on your business
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K2 Integrity is committed to monitoring, evaluating and reporting the rapidly evolving multilateral sanctions against Russia for its ongoing invasion of Ukraine. Our latest policy update summarizes the evolution of global sanctions since the last K2 Integrity update and outlines the implications for the private sector.
Since February 25, numerous authorities have taken sanctions-related actions against Russia as follows:
EU actions include:
- Sanction 26 individuals and one entity, including Russian oligarchs and individuals active in the oil, banking and financial sectors as well as government and military officials. These designations largely align with US sanctions and target those who support the Russian Federation’s revenue generation and direct contribution to the invasion of Ukraine.1
- Imposing restrictive measures on the listing and provision of services regarding the shares of Russian public entities on EU trading venues. These include: prohibiting deposits of more than EUR 100,000 from Russian nationals or residents, the maintenance of Russian client accounts by EU central securities depositories and the sale of euro-denominated securities to Russian clients ; prohibit the sale, supply, transfer or export to Russia of specific goods and technologies in oil refining; and the introduction of an export ban on goods and technology in the aerospace industry and related insurance, reinsurance and maintenance services.2
- Pointing to Vladimir Putin and Sergei Lavrov as directly responsible for Russia’s continued unprovoked and illegal invasion of Ukraine.3
UK actions include:
- Freeze the assets of all major Russian banks and exclude them from the UK financial system
- Limitation of deposits Russian customers can make to UK bank accounts to GBP 50,000
- The introduction of laws, from 1 March 2022, to prevent big Russian companies and the Russian state from generating revenue or borrowing money from UK markets; prevent designated banks from accessing sterling and clearing payments through the UK; and banning exports of high-tech items in sectors such as electronics, telecommunications and aerospace. Future laws would also add oil refineries to UK sanctions.4
- Suspension of export licenses for dual-use goods
- Pointing to Vladimir Putin and Sergei Lavrov as directly responsible for Russia’s continued unprovoked and illegal invasion of Ukraine.5
Swiss stocks include:
- Freeze the assets of sanctioned individuals and entities, including those targeting the President of the Russian Federation, Vladimir Putin, and Foreign Minister Sergei Lavrov.6
- Committing to adopt the sanctions imposed by the EU on February 23 and 25 with immediate effect.
US stocks include:
- Issued Directive 4 under Executive Order (“EO”) 14024 which prohibits transactions with the Central Bank of Russia, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation.7
- Addition of the Russian Direct Investment Fund (RDIF), its management company, one of the management company’s subsidiaries and its CEO to OFAC’s list of specially designated nationals and blocked persons.
- Pointing to Vladimir Putin and Sergei Lavrov as directly responsible for Russia’s continued unprovoked and illegal invasion of Ukraine.8
- Added regulations to implement EO 14024. As additional restrictive measures complicate compliance measures, these regulations will provide interpretive guidance, definitions, general licensing, and other regulatory provisions as needed.9
Impact on global markets:
- According to US Treasury officials, Russia has about $630 billion in reserves, and US and European restrictions on Russian central bank assets will tie up nearly half of Russia’s reserves. Directive 4 will disrupt Russia’s attempts to prop up its currency by restricting the global supply of the ruble and access to reserves that Russia may try to exchange to prop up the rouble.
- These multilateral actions exacerbated a rapid asset sell-off and the ruble’s steepest depreciation since 1998. The ruble is expected to continue to fall against the US dollar as the currency loses a third of its value in the markets. foreigners, hitting an all-time low for a dollar in Moscow.
- Notably, US equities at this stage explicitly provide exceptions for energy-related transactions to minimize market volatility.
Implications for the private sector:
- US prohibitions relating to the Central Bank of Russia, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation include restrictions on the transfer of assets to these entities or on any foreign exchange transactions for or on behalf of such entities. . Penalties are effective immediately and there is no blanket license authorizing a liquidation period. These sanctions prohibitions do not include an obligation to freeze assets. The US Treasury Department has also amended the 8A General License to include the Central Bank of the Russian Federation to allow any “energy-related” transactions.
- Industries must be prepared for a possible large-scale trade embargo and must analyze their exposure to Russia and Belarus. While the short-term impact of sanctions and restrictions is hurting the Russian economy, the broader message from the EU and the US is that these restrictions will not stop until Russia stops the fire and will not withdraw from Ukraine.
- Given its rapidly shrinking access to the global market, we expect Russia to continue its efforts to evade various sanctions bans. In addition to traditional non-transparent practices, evolving sanction evasion techniques may emerge, which may require adjustments to customer and transaction monitoring programs to detect such evasion tactics.
Stay tuned to K2 Integrity and the DOLFIN platform for additional thought leadership on Russian sanctions-related topics.
1. European Council, “Russia’s Military Aggression Against Ukraine: Council Imposes Sanctions on 26 Persons and One Entity” (28 February 2022), https://www.consilium.europa.eu/en/press/press-releases/2022/ 28/02/military-aggression-by-russia-against-the-ukrainian-council-imposes-sanctions-on-26-people-and-one-entity/.
2. European Council, “EU adopts new package of measures to respond to Russian military aggression against Ukraine” (28 February 2022), https://www.consilium.europa.eu/en/press/ press-releases/2022/ 28/02/eu-adopts-a-new-set-of-measures-to-respond-to-russias-military-aggression-against-ukraine/.
3. European Council, “Russia’s Military Aggression Against Ukraine: EU Imposes Sanctions Against President Putin and Foreign Minister Lavrov and Adopts Wide Ranging Individual and Economic Sanctions” (25 February 2022), https://eur-lex.europa.eu/legal -content/EN/TXT/PDF/?uri=OJ:L:2022:052:FULL and https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1057547/ Notice_Russia_250222.pdf.
4. Office of Financial Sanctions Implementation, HM Treasury (28 February 2022), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1057799/Notice_Russia_280222.pdf.
5. European Council, “Russia’s Military Aggression Against Ukraine: EU Imposes Sanctions Against President Putin and Foreign Minister Lavrov and Adopts Wide Ranging Individual and Economic Sanctions” (25 February 2022), https://eur-lex.europa.eu/legal -content/EN/TXT/PDF/?uri=OJ:L:2022:052:FULL and https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1057547/ Notice_Russia_250222.pdf.
6. Swiss Federal Council, “Switzerland Adopts EU Sanctions Against Russia” (February 28, 2022), https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-87386.html.
7. United States Department of Treasury, Office of Foreign Assets Control, General License No. 8A (February 28, 2022), https://home.treasury.gov/system/files/126/russia_gl8a_1.pdf.
8. Journal of the Office of the European Union, Legislation (25 February 2022), https://eur-lex.europa.eu/legal-content/FR/TXT/PDF/?uri=OJ:L:2022 :052: FULL, and Office of Financial Sanctions Implementation, HM Treasury, (25 February 2022), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1057547/Notice_Russia_250222 .pdf .
9. US Department of the Treasury, “Treasury Bans Transactions with Central Bank of Russia and Imposes Sanctions on Key Sources of Russian Wealth” (February 28, 2022), https://home.treasury.gov/news/press -releases/ jy0612.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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