Sanctions Weekly Update – Ukraine/Russia Conflict – March 13, 2023

US Sanctions | EU Sanctions | UK Sanctions | Russia/Ukraine Sanctions | Other Notable Developments

Week of March 13, 2023

I. US SANCTIONS

• NASDAQ Plans to Delist Russian Stocks: On March 15, Reuters reported that the NASDAQ stock exchange has informed certain Russian companies that their stocks will be delisted. Trading in these companies’ securities have been suspended by NASDAQ for more than a year, since Russia invaded Ukraine on February 24, 2022. Some of the leaders of these companies have already been subject to Western sanctions. Read more>>
• Ben Harris Addresses Russian Energy Price Cap at the American Enterprise Institute: On March 14, the US Assistant Secretary for Economic Policy Ben Harris addressed the Russian energy price cap at the American Enterprise Institute. In his remarks, he discussed how the price cap policy on Russian oil would simultaneously achieve the two seemingly conflicting goals of deterring Russia from profiting on its war in Ukraine, as well as maintaining the supply and stability of global energy markets. Read more>>
• US and EU Vow to Stand Together in Support for Ukraine: On March 10, the US President and the European Commission President met at the White House to discuss various issues including Russia’s war against Ukraine. In their Joint Statement, the US and EU vow to stand together in support for Ukraine and to continue the joint efforts in sanctioning Russia. Read more>>and Read more>>
• Secretary of State Calls Ukrainian Foreign Minister: On March 16, US Secretary of State Anthony Blinken spoke with Ukrainian Foreign Minister Dmytro Kuleba. They discussed the latest situation on the battlefield and the US’s steadfast support to Ukraine as it defends itself against Russia’s brutal attacks. Read more>>
• Secretary of Defense Calls Ukrainian Minister of Defense: On March 13, US Secretary of Defense Lloyd J. Austin III spoke with Ukrainian Minister of Defence Oleksii Reznikov regarding priorities for the Ukraine Contact Defense Group on March 15. Secretary Austin provided an update of US security assistance efforts, and Minister Reznikov detailed recent developments on the ground in Ukraine. Read more>>
• US and Turkey Discusses Ukraine War and Efforts to Renew Black Sea Grain Initiative: On March 14, National Security Advisor Jake Sullivan met with Dr. Ibrahim Kalin, Spokesperson and Chief Advisor to the President of Turkey. They discussed, among other things, the shared concerns about Russia’s ongoing aggression against Ukraine, as well as Turkey’s efforts to ensure a renewal of the Black Sea Grain Initiative. Read more>>
• US Formula 1 Team Denies Allegations that It Violated Russia Sanctions: On March 16, the Haas Formula One team dismissed a report from US broadcaster PBS claiming that it had provided machines and parts to Russia in violation of US export control laws. The team confirmed it terminated its relationship with Russian distributor Abamet and said, “That story is simply false, both in its overall impression and in many of its particular statements. The 18 machines referenced in the story left the Haas Automation factory prior to the Russian invasion of Ukraine.” Read more>>
• Florida Governor Says Further US Involvement in Ukraine Not Vital to National Interest: On March 13, Florida Governor Ron DeSantis commented that becoming "further entangled in a territorial dispute between Ukraine and Russia" is not a vital US national interest, sharply breaking with Republicans who are determined to defend Ukraine against Russia’s invasion. The Florida Governor is seen as one of the Republicans’ strongest contenders for the 2024 presidential election. Read more>> andRead more>>
• Russian Fighter Jet Strikes US Unmanned Aircraft: On March 14, a Russian Su-27 aircraft struck a US Air Force intelligence, surveillance and reconnaissance MQ-9 unmanned aerial vehicle's propeller, causing US forces to bring it down into international waters of the Black Sea. According to the US Air Force, the incident “follows a pattern of dangerous actions by Russian pilots while interacting with U.S. and allied aircraft over international airspace, including over the Black Sea” and “could lead to miscalculation and unintended escalation". The incident is the first known direct US-Russia encounter since the latter’s invasion of Ukraine about one year ago. Read more>>,Read more>> and Read more>>

II. EU SANCTIONS

• Ukraine’s Territorial Integrity, Sovereignty and Independence: EU Renews Individual Restrictive Measures for Six Months: The Council decided to prolong the restrictive measures targeting those responsible for undermining or threatening the territorial integrity, sovereignty and independence of Ukraine for another six months, until 15 September 2023. Read more>>
• Ukraine Confident of Positive EU Progress Assessment in Spring: The European Commission intends to evaluate Ukraine’s progress in fulfilling requirements for EU accession. Progress will be presented in May, and by then, Kyiv will have completed the implementation of most of them, Ukraine’s Deputy Prime Minister for European Integration, Olha Stefanishyna said. Read more>>
• ‘Not Much Left’ on Russia Sanctions, Other Support Needed Now, Says EU’s Borrell: The EU has nearly exhausted its options for punitive measures against Russia and the bloc’s attention needs to shift to financial and military support for Ukraine, the EU’s chief diplomat Josep Borrell said. Read more>>
• Poland to Send Ukraine First Batch of MiG-29 Jets in Coming Days: Poland will send Ukraine four MiG-29 fighter jets in coming days, Polish President Andrzej Duda said on Thursday (16 March), making it the first of Kyiv’s allies to provide such aircraft. Read more>>
• Commission Approves EUR 650 Million Slovenian Scheme to Support Companies Facing Increased Energy Costs in Context of Russia's War against Ukraine: The European Commission has approved a EUR 650 million Slovenian scheme to support companies facing increased energy costs in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>

III. UK SANCTIONS

• OFSI Publishes New Guidance on Ownership & Control: On March 16, 2023, OFSI published updated guidance on enforcement and monetary penalties for breaches of financial sanctions (the “Guidance”), including by adding a new section on ownership and control. Section 3.22 - 3.31 of the Guidance outlines, among other things, OFSI’s expectations of companies in making an ownership and control assessment. The Guidance states that OFSI expects companies to: demonstrate evidence of a decision-making process that takes account of the sanctions risks and considers what would be an appropriate level of due diligence in light of that risk; make such decisions by reference to an internal framework or policy; carefully scrutinise information obtained as part of an ownership and control assessment; and review their due diligence and ownership and control assessments at appropriate times. The guidance also sets out due diligence efforts that OFSI may consider to be potentially mitigating; and a non-exhaustive list of due diligence steps a company make take to assess (i) formal ownership and/or control; and (ii) indirect or de facto control by a UK asset freeze target. Read more>>
• UK Supreme Court Says Trade Sanctions Aren’t Duress in English Law: On March 15, 2023, the UK Supreme Court held that the Law Debenture Trust Corporation plc, acting on behalf of Russia, is not entitled to a summary judgment in its contractual dispute with Ukraine relating to a loan made by Russia to Ukraine. The loan took the form of Eurobonds with a nominal value of US $3 billion and interest at 5% per annum to Russia, issued by Ukraine in 2013. The Supreme Court unanimously held that the Trustee is not entitled to summary judgment. This means that Ukraine will be permitted to defend the claim for the sums due under the bonds at trial before the High Court. The Court held that Ukraine should be permitted to defend the claim on the ground of duress, but only to the extent that it is based on duress of the person or of goods resulting from Russia's alleged threatened use of force. Read more>> and Read more>>
• First Judgment on De-listing Case Under UK Sanctions Act: On March 14, 2023, the High Court rejected the first challenge to a UK sanctions listing, brought by LLC Synesis, a Belarussian technology company. Synesis (also US and EU sanctioned) was added to the UK list for providing video surveillance system to the Belarussian state which could be used in the suppression of protestors. Synesis challenged the decision not to remove it from the sanctions list when it had asked the Government to review the designation. The High Court rejected its application under the Sanctions & Anti-Money Laundering Act on the grounds that the decision not to de-list it was not unreasonable or disproportionate. Read more>> and Read more>>
• UK Economic Deterrence Initiative Supports Implementation and Enforcement of UK Sanctions: On March 13, 2023, as part of the Integrated Review Refresh (IR23) the UK government announced a £50 million Economic Deterrence Initiative to strengthen the implementation and enforcement of UK sanctions, including by tackling sanctions evasion. Among other things, the government has said that it will: increase the number of security cleared analysts available to ensure that future measures are more precise and have greater impact; consult on updating the UK export control regime with regard to sensitive emerging technology transfers; and work with international partners to make multilateral controls more effective. Read more>> and Read more>>
• Insurers Face ‘Mega Trial’ over Planes Stranded in Russia: Insurers are facing a “mega trial” in London’s High Court next year after they refused to pay billions of dollars of claims made by aircraft leasing companies with planes stranded in Russia by its invasion of Ukraine. Overall, hundreds of western-owned planes were stranded, triggering a legal battle between leasing companies and their insurers over who should be liable for billions of dollars in costs. Aviation is one of the biggest areas of expected insurance losses from the Ukraine war. For Lloyd’s of London, just under half of the £1.6bn the market has set aside because of the conflict relates to aviation claims. Read more>>

IV. RUSSIA/UKRAINE SANCTIONS

• Ukraine Adds 120 Individuals and 287 Entities to the Sanctions List: On 10 March, Ukraine extended sanctions to 120 new individuals and 287 legal entities. The list of sanctioned entities includes multiple companies from the gambling sector, reportedly for their affiliation with Russia. Read more>>
• Russia Considers Terminating Tax Agreements with “Unfriendly” Countries: The Russian Ministry of Finance and the Foreign Ministry suggested Russian President Vladimir Putin should issue a decree on the suspension of double taxation agreements with countries that imposed sanctions against Russia. The list of such “unfriendly” countries includes the United States, the entire European Union and multiple other states. Russia has agreements on prevention of double taxation with many of these states. Read more>>
• Russian Court Orders Russian Subsidiary of ExxonMobil to Pay RUB 15 Billion to Russian Budget: The court came to the conclusion that the actions of ExxonMobil in April last year to stop the work at the Sakhalin-1 project did not have technically and economically sound motives. From the ENL letters to the authorities of the Russian Federation followed that the work on Sakhalin-1 project was stopped due to the introduction of the US, the UK and the EU countries of sanctions against Russia. However, the court did not recognize the indicated reasons “as an objective basis for the termination of the“ Sakhalin-1 ”project”. According to the court’s statement, “the restrictive measures were taken by the governments of the countries without a decision of the UN Security Council in violation of the requirements of Art. 41 of its charter". Read more>>
• Raiffeisen Bank Discusses Asset Exchange Scheme with Sberbank: The management of the Austrian Raiffeisen Bank International discussed a possible scheme to exchange assets with Sberbank to obtain the amount of revenue that RBI received in Russia in 2022 and could not withdraw from the country due to Russian restrictions. The value of the assets in question might reach € 2 billion – the net profit of Raiffeisen bank in Russia last year. Raiffeisen bank became the second largest bank in Russia by profit in 2022. Read more>>
• Owner of Russia's Tinkoff Bank Sees 2022 Net Profit Drop: On March 15, 2023, it was reported that TCS Group Holding, the owner of Russian online lender Tinkoff, saw a 67% drop in 2022 net profit to 20.8 billion roubles ($274 million), as sweeping Western sanctions hit Russia's financial sector. The sector struggled in 2022, with profits slumping around 90% as many major lenders were disconnected from the SWIFT global payments network. Read more>>
• Ukraine and EU Continue Liberalization of Truck Transportation for the Next Year: The corresponding agreement was reached during the first meeting of the joint committee on the transportation of freight by road. The document on liberalization of freight transportation between the EU and Ukraine was signed in June 2022. It abolished the permits for Ukrainian road carriers for bilateral and transit transportation in EU countries. After signing the agreement in June 2022, the number of trucks crossing the border in the direction of the EU increased by 53%, and the number of crossings - by 43%.Read more>>
• Alfa-Bank Confirms Deal to Sell Aven and Friedman’s Shares: Alfa-Bank is preparing a change in controlling shareholders, and it may not require additional coordination of foreign regulators, a representative of a credit institution told RBC. He confirmed that the founders of the bank Mikhail Friedman and Peter Aven are discussing the sale of their shares to another beneficiary - Andrei Kosogov. The sale of the shares of Friedman and Aven will help the "speedy transfer of the bank to the zone of Russian jurisdiction". Friedman and Aven, by selling shares, strive to escape from the Western sanctions. Read more>>
• Russia Agrees to Extend Black Sea Grain Deal for 60 days: On March 13, 2023, Russia agreed to extend Black Sea grain deal, but only for another 60 days half the length of the preceding renewal. drawing an immediate challenge from the Ukrainian Deputy Prime Minister Oleksander Kubrakov saying that the “agreement involves at least 120 day of extension, therefore Russia’s position to extend the deal only for 60 day contradicts the document signed by Turkey & the UN. We’re waiting for the official position of UN & Turkey as the guarantors of the initiative.” Read more>>
• IMF Mission Completes New Round of Negotiations with Ukraine: According to an IMF statement, discussions between IMF staff and Ukrainian authorities were productive and very good progress has been made towards agreement on a set of policies that could underpin a Fund-supported program. Building on this progress, staff and the authorities expect to conclude the discussions in the coming days. Read more>>
• Putin Indicates Russia Could Loosen Restrictions on Dividend Payments to Foreigners: On March 16, 2023, President Vladimir Putin was in attendance at the annual Congress of the Russian Union of Industrialists and Entrepreneurs (RSPP) where he urged Russia’s billionaires to put patriotism before profit, telling them to invest at home to shore up the economy in the face of Western sanction. He said “A responsible entrepreneur is a real citizen of Russia, of his country, a citizen who understands and acts in its interests,….. he does not hide assets offshore, but registers companies here, in our country, and does not become dependent on foreign authorities." Russia considers any country that has hit Moscow with sanctions - including the U.S., Canada, Japan and the 27 members of the European Union - to be "unfriendly" and has imposed a number of counter-sanctions aimed specifically at them. He said "I will ask the government to ... think about a more flexible situation, in which it would be possible to pay dividends and withdraw some funds on condition that, among other things, these funds are directed, perhaps primarily, towards developing business in Russia,". Read more>>
• Russians Use Tether to Send Money to the West, Evading Sanctions and KYC: On March 15, 2023 in a report published by Transparency International Russia, a global anti-corruption nongovernmental organization, it was reported that at least eight over-the-counter brokers in Moscow that were willing to sell tens of thousands of dollars in USDT crypto currency for cash and then exchange the USDT crypto currency in the U.K for pounds sterling cash, without know-your-customer paperwork. The eight digital asset exchanges listed in the report were Pridechange, Bitokk, Alfa Exchange, Suex, Finex24, Mychange, Trust Exchange, and 24expay. The report also revealed that OFAC sanctioned the Suex exchange in 2021 for facilitating transactions for ransomware hackers. Read more>> and Read more>>
• Kremlin Says Western Sanctions “Insured” Russia against SVB Collapse: On March 15, Business Insider reported that Russia is “insured” against the US banking crisis caused by the collapse of Silicon Valley Bank (SVB), according to the Kremlin’s spokesman. Under Western sanctions, international firms have either exited or are working on exiting Russia since its invasion of Ukraine last February, and Russian banks were also banned from using SWIFT, rendering the country mostly isolated from the global financial system. Read more>>

V. OTHER NOTABLE DEVELOPMENTS

• Canada Imposes Additional Restrictions on Russian Imports: On March 10, Canada amended the Special Economic Measures (Russia) Regulations to prohibit the import, purchase and acquisition of steel and aluminum goods listed under Schedule 11 from Russia or from any person in Russia. The newly listed goods cover both finished and unfinished products, and include iron and steel sheet piling, railway or tramway track construction material, tubes, pipes and hollow profiles, and articles of aluminum. The amendment takes effect from March 10, 2023. Read more>> and Read more>>
• Turkey Bans Transit of Sanctioned Goods to Russia: On March 10, Bloomberg reported that Turkey had abruptly halted the transit of sanctioned goods to Russia since March, following “serious pressure” from the US and EU to support measures imposed over Russia’s invasion of Ukraine. No formal announcement nor any transitory period was given for the blockage, and the cargo clearance system “simply stopped working”, according to market participants. Turkey’s exports to Russia rose tremendously after the latter’s invasion of Ukraine last year, owing to the close personal ties between the two countries’ leaders. Read more>> 
• Politico Reports Chinese Companies Supplying Russia with Rifles and Body Armor: On March 16, Politico reported that it has reviewed trade data from customs aggregator Import Genius that indicates Chinese companies had sent approximately 1,000 rifles to Russia between June and December 2022, along with some shipments of body armor and drone parts. The rifles were described as “civilian hunting rifles” in the customs data, but the company shipping the items was a defense contractor, and the recipient works with the Russian military. Read more>> 
• Japan Weighs Weapon Exports to Nations Under Invasion: On March 10, Nikkei Asia reported that Japan is considering exporting weapons to countries that are fighting an invasion, such as Ukraine, in a move expected to boost Tokyo’s credibility in the global security area. The Japanese Prime Minister had called on lawmakers last week to amend the arms export rules to allow the country to send weapons to Ukraine. Read more>> 
• How Russia Supplies Its War Machine: On March 10, the Wall Street Journal reported on how the Western sanctions might have failed to strangle Russia’s economy after its invasion of Ukraine, due to the less-than-effective ability of the US and its allies to dictate global trade flows in high-technology items such as microchips. Read more>> 
• Iran to Buy Fighter Jets from Russia: On March 11, Reuters reported that Iran has concluded a deal to purchase advanced fighter planes from Russia, according to state media reports, expanding a relationship that has seen Iranian-built drones used in Russia’s war on Ukraine. The Russian President had met with the Iranian Supreme Leader back in July 2022, stressing closer ties in the face of Western pressure over the war in Ukraine. Read more>>
• Saudi Arabian Oil Giant Reports Record Annual Net Profit Despite War in Ukraine: On March 12, Reuters reported that the Saudi Arabian oil giant Aramco reported a record annual net profit of $161.1 billion for 2022. According to the company, its crude supplies to its main Asian customers, including China and India, were not impacted by the uptick of Russia sales into Asia on the back of Western sanctions. Read more>> and Read more>>
• India to Ensure No Breach on Russian Oil Sanctions: On March 12, Bloomberg reported that India will not breach Western sanctions on Russia including the price cap imposed on Russian oil purchases, and that the country’s banks and traders have been asked to adhere to the rules, according to insiders. Read more>>
• ICC to Seek the Arrest of Russian Officials over War Crimes: On March 14, Reuters reported that the International Criminal Court (ICC) is expected to seek arrest warrants for Russian officials, marking the first international war crime cases arising from Russia’s invasion of Ukraine. In a report published on March 16, the Independent International Commission of Inquiry on Ukraine said that the Russian forces have carried out “indiscriminate and disproportionate” attacks on Ukraine, resorted to torture, killed civilians outside of combat and failed to take measures to safeguard the Ukrainian population. Read more>>, Read more>> and Read more>>
• UN Commission Finds Russia Committed War Crimes in Ukraine: The UN Commission of Inquiry on Ukraine has found that Russia committed numerous war crimes in Ukraine, including attacks on energy infrastructure, forcibly transporting children to Russia, and imprisoning, torturing, raping, and killing Ukrainians, according to a report published on March 16. The Commission said that Russian attacks on civil energy infrastructure, which began in October, "may amount to" crimes against humanity, but this needs to be investigated further. The Commission was also "struck by the extent of the destruction," according to the report. Read more>>
• Ukraine War Accelerates Global Transition to Renewable Energy: On March 14, Nikkei Asia reported that various countries had accelerated in adopting renewable energy last year, after the war in Ukraine raised awareness on energy security created by the overdependence on imported Russian fuel. According to data from the International Energy Agency, a 40% surge in new renewable generating capacity was recorded last year, with China contributing the largest share. Read more>>
• IOC Urges UK Government to Respect “Autonomy of Sport”: On March 14, Reuters reported that the International Olympic Committee (IOC) has urged the UK government to respect the "autonomy of sport", after the latter’s attempt to lobby sponsors against a proposed pathway for Russian and Belarusian athletes to participate at next year's Paris Games. The IOC issued sanctions against Russia and Belarus after last year's invasion of Ukraine, but remains reluctant to exclude their athletes completely from participating in the Olympics. Read more>>
• Canada Announces Additional Military Assistance to Ukraine: On March 15, the Canadian Defense Minister Anita Anand announced in the Ukraine Defense Contact Group meeting hosted by US Secretary of Defense Lloyd J. Austin III that the country will provide additional military assistance to Ukraine. The assistance includes 8,000 rounds of ammunition, 12 air defense missiles, and also 1,800 rounds of training ammunition in support of the donation of Leopard 1 tanks announced by Denmark, Germany, and the Netherlands. Read more>>