Sanctions Weekly Update – Ukraine/Russia Conflict – June 19, 2023

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

I. US SANCTIONS

• OFAC Reaches Settlement with Swedbank Latvia for Apparent Violations of Crimea Sanctions: On June 20, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with Swedbank AS (Latvia), a subsidiary of Swedbank AB (publ) headquartered in Stockholm, Sweden, regarding 386 apparent violations of OFAC’s Crimea sanctions. The Latvian bank agreed to remit over $3.4 million to settle its potential civil liability in allowing one of its customer to, throughout 2015 and 2016, use its e-banking platform from an IP address in Crimea to send payments to persons in Crimea through US correspondent banks. Read more>>
• US Provides Additional Humanitarian Assistance for Ukrainians: On June 16, the Department of State announced that the US is providing $205 million in additional humanitarian assistance for the people of Ukraine as part of its support for those affected by Russia’s invasion. US humanitarian assistance includes critical support such as food, safe drinking water, protection services, education, livelihoods, legal assistance, accessible shelter, health care, and more through international and non-governmental partners in the region. Read more>>
• US Announces $1.3 Billion of Additional Aid for Ukraine Recovery: On June 21, on the Ukraine Recovery Conference held in London, Secretary of State Antony J. Blinken announced that the US is sending $1.31 billion more in aid to Ukraine to help the country overhaul its energy grid and modernize its ports, railways and other infrastructure. On the Conference, Secretary Blinken stressed the importance of recovery in “laying the foundation for Ukraine to thrive as a secure, independent country, fully integrated with Europe, connected to markets around the world,” and detailed how the new additional US aid will help to achieve that goal. Read more>> and Read more>>
• Secretary Blinken’s Meeting with Ukrainian Foreign Minister: On June 20, Secretary of State Antony J. Blinken met with Ukrainian Foreign Minister Dmytro Kuleba in London on the margins of the Ukraine Recovery Conference. Secretary Blinken underscored the US’s continuous support for Ukraine’s economic recovery and revitalization, and the officials discussed the need for Ukraine to continue to implement reforms. The Secretary also briefed the Foreign Minister on his trip to China and discussions with officials there about Russia’s war in Ukraine. Read more>> and Read more>>
• Secretary Blinken’s Meeting with Ukrainian Prime Minister: On June 21, Secretary of State Antony J. Blinken met with Ukrainian Prime Minister Denys Shmyhal in London on the margins of the Ukraine Recovery Conference. Apart from underscoring the US’s continuous support and commitment towards economic recovery in Ukraine, the leaders also discussed cooperation to strengthen Ukrainian institutions and accelerate progress on key reforms to ensure a strong investment climate, as well as supporting Ukraine’s vision for a more secure and decentralized clean energy system integrated with Europe. Read more>>
• Fourth Meeting of Ukraine Donor Coordination Platform Steering Committee Takes Place: On June 21, the fourth meeting of the Steering Committee of the Multi-agency Donor Coordination Platform for Ukraine took place on the margins of the Ukraine Recovery Conference in London. The meeting was co-chaired by Deputy National Security Advisor for International Economics Mike Pyle, Deputy Prime Minister for Restoration of Ukraine Oleksandr Kubrakov, and European Commission Director-General for Neighborhood and Enlargement Negotiations Gert Jan Koopman, with participation by Minister of Finance of Ukraine Sergii Marchenko. Leaders and representatives discussed ongoing work to lay the foundation for transparent and well-coordinated recovery and reconstruction efforts, progress on Ukraine’s 2023 early recovery priorities in the areas of energy infrastructure, civilian demining, critical and social infrastructure, housing, and support to the private sector. They also heard updates on the development and implementation of Ukraine’s reform agenda. Read more>>
• National Security Advisor to Meet with Ukraine War Sceptics from Developing Nations: On June 21, Financial Times reported that National Security Adviser Jake Sullivan will fly to Copenhagen, Denmark this weekend to meet with representatives of several developing countries that have not condemned Russia’s invasion of Ukraine. According to people familiar with the matter, countries that may attend the unannounced meeting include India, Brazil, South Africa, Turkey and possibly China, though the list of attendees has not been finalized. The planned meeting to expand the pro-Ukrainian coalition reportedly came after Ukrainian President Zelenskyy warned that Kyiv’s counteroffensive launched earlier this month had been “slower than desired.” Read more>>

II. EU SANCTIONS

• EU Greenlights 11^th Russia Sanctions Package, Mostly Targeted at Filling Loopholes: After weeks of wrangling, EU ambassadors on Wednesday (21 June) agreed to an 11^th package of sanctions against Russia over its invasion of Ukraine, designed to prevent third countries and companies from circumventing the bloc’s existing measures. The text of the package is yet to be published. Read more>>
• EU Commission Moves to Make Russia Pay for Ukraine: Commission President Ursula von der Leyen told a Ukraine reconstruction conference in London on Wednesday that the proceeds from the over €200 billion belonging to the Central Bank of Russia frozen in the EU will “eventually” be used to pay for Ukraine reconstruction. She said a proposal would be made before the summer break. Read more>>
• EU Sees Hurdles to Seizing €200 Billion in Russian Assets: The European Union has assessed that it can’t legally confiscate outright frozen Russian assets and instead is focusing on using those assets temporarily, according to Bloomberg. Read more>>
• EU, Kazakhstan in Contact on Preventing Russia Sanctions Evasion, Steinmeier Says: German President Frank-Walter Steinmeier told reporters after talks with Kazakh President Qasym-Zhomart Toqaev in Astana on June 20 that the European Union and the energy-rich Central Asian nation are in close contact on preventing the evasion of Western sanctions imposed on Russia. Read more>>
• EU Received 300 Shipments of LNG from Russia Since Beginning of Ukraine War: EU countries, led by Belgium, France, and Spain, have imported Russian LNG representing approximately $20 billion in revenue, since the full-scale invasion of Ukraine. Data show the pace of deliveries from the Yamal LNG project in 2023 is on track to match and possibly surpass last year’s totals. Read more>>
• Oil Markets Gain 2% As Russia’s Druzhba Pipeline May Be Hit by EU Sanctions: Oil supply may be cut by 250,000 bpd if the southern route of Druzhba pipeline is included in the final version of the new sanctions package. Read more>>
• Lithuania Targets Dual-Use Products to Russia in Signal to EU: Lithuania plans to unilaterally ban a swathe of dual-use goods that may enter Russia via Belarus and potentially end up on the battlefield in Ukraine, raising pressure on the European Union to tighten restrictions targeting Moscow. Read more>>
• Novatek Reveals Sanction Costs for Arctic LNG 2: Russia’s largest independent gas producer, Novatek, has admitted that international sanctions against the country and its corporations will result in higher costs to bring into operation the three trains at its second liquefied natural gas project, Arctic LNG 2. Read more>>
• France Debates Effectiveness of Russian Media Sanctions: French authorities and stakeholders have held a debate on the implementation of sanctions against Russian propaganda TV channels and media companies. Read more>>
• Commission Approves EUR 7 Million Cypriot Scheme to Support Sheep and Goat Breeders in the Context of Russia's War against Ukraine: The European Commission has approved an approximately EUR 7 million Cypriot scheme to support sheep and goat breeders in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework. Read more>>
• Commission Approves Re-Introduction of Two Italian Schemes to Support Companies in the Context of Russia's War against Ukraine: The European Commission has approved the re-introduction of two Italian schemes to support companies in the context of Russia's war against Ukraine. The schemes were approved under the State aid Temporary Crisis and Transition Framework. Read more>>
• Commission Approves Italian Measures to Support Labor Costs of Companies in the Context of Russia's War against Ukraine: The European Commission has approved two Italian schemes, with a total budget of around EUR 535 million, to support labour costs of companies in the context of Russia's war against Ukraine. The schemes were approved under the State aid Temporary Crisis and Transition Framework. Read more>>
• Commission Approves EUR 718 million Czech Scheme to Support Companies in the Heat Sector in the Context of Russia's War against Ukraine: The European Commission has approved an approximately EUR 718 million (CZK 17 billion) Czech scheme to support companies affected by increased heat 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>>
• EU Sees Hurdles to Seizing €200 Billion in Russian Assets: The European Union has assessed that it can’t legally confiscate outright frozen Russian assets and instead is focusing on using those assets temporarily. The EU is zeroing in on two options as it keeps exploring how it could harness more than €200 billion ($219 billion) in frozen Russian central bank assets and channel them to Ukraine. Many of the funds are at settlement giant Euroclear Ltd., where they generated nearly €750 million by the first quarter of this year. Read more>>
• French Retailer Decathlon Subject to Almost USD 2 Million Fine after Exiting Russia: The French retailer of sports goods Decathlon was ordered to pay more than 140 million rubles for closing its store in St. Petersburg. The decision was taken by the Moscow Arbitration Court. The amount of the fine was calculated based on EUR 1000 for each hour of downtime of the store. Read more>>

III. UK SANCTIONS

• UK Amends General Licence for Humanitarian Assistance in Ukraine: On June 20, 2023, the Office of Financial Sanctions Implementation (OFSI) amended the General Licence INT/2022/1947936, which deals with humanitarian assistance in Ukraine. The notice was amended to: (i) update the definition of ‘non-government controlled Ukrainian territory’ to capture Kherson and Zaporizhzhia oblasts; and (ii) update Annex 1 (Designated Financial Institutions) to capture those financial institutions that have been designated since 7 July 2022. Read more>>
• UK Announces New Legislation Regarding Ukrainian Compensation and Russian Sanctions: On June 19, 2023, the UK Foreign Secretary, James Cleverly, announced a wide-ranging piece of new legislation, which will (i) allow the UK to maintain sanctions on Russia until Moscow pays compensation to Ukraine; and (ii) introduce a regime through which sanctioned Russians can donate their frozen funds towards the reconstruction of Ukraine. The legislation aims to deliver on a commitment made by UK Prime Minister Rishi Sunak, and the other G7 leaders, last month to keep Russian assets frozen until the country pays for the damage that it has done to Ukraine. Read more>>
• OFSI Issues New Oil Price Cap Guidance and General Licence: On 14 June 2023, OFSI issued the General Licence INT/2023/3074680 which will allow for the trade in derivatives and futures related to the supply or delivery by ship of Russian oil – a practice that was previously prevented by regulation 46Z9C of the Russia (Sanctions) (EU Exit) Regulations 2019. Read more>>

IV. RUSSIA/UKRAINE SANCTIONS

• Ukraine Joins Council of Europe Development Bank: Ukraine officially completes the process of joining the Council of Europe Development Bank (CEB), Ukraine's Finance Ministry reported on June 20. Ukraine became Development Bank's 43rd member. Ukraine's membership in the CEB happened less than a year after the country officially applied in June 2022. Read more>>
• Sberbank Sells Austrian Subsidiary, Completing Exit from European Market: The bank has obtained all the necessary approvals from regulators to complete the sale, its press service said. Sberbank’s Austrian subsidiary will be taken over by an Austrian firm controlled by entrepreneur Stefan Zöchling, according to the bank’s statement. Sberbank had announced plans to exit the European market shortly after it was targeted by sanctions, as its European subsidiaries faced an abnormal outflow of clients. Read more>>
• Austria’s Raiffeisen Bank Suspends Euro Transfers in Russia: Austrian banking group Raiffeisen, one of the last Western lenders remaining in Russia, announced Wednesday that it will suspend transfers of euros to banks in Russia and several other countries popular among Russian travelers, including Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Armenia, Georgia, Belarus and Moldova. Transfers will also be blocked in the United Arab Emirates and Jordan. Raiffeisen Russia said the change — impacting both individual and corporate clients — was due to “restrictions imposed by correspondent banks.” Read more>>
• Russian Military Receives Western Electronics through Kazakhstan and Kyrgyzstan: According to an investigation, Russia imports Western electronic equipment for its military, evading US and EU sanctions, using intermediaries - companies in Kyrgyzstan and Kazakhstan. The journalists found evidence of Western dual-use goods being shipped through these countries to Russia, including microchips, telecommunications equipment and other electronics, which the Ukrainian military found in Russian missiles, tanks, helicopters, drones and radio systems. Read more>>
• Ukrainian National Agency for the Prevention of Corruption Excludes a Company from the List of International War Sponsors: The delisted company is the world's leading marine fuel supplier, the Irish Peninsula Petroleum Limited. The company has sent a corresponding letter to the Agency indicating the fulfilled conditions that allow it to be excluded from the list. This is the first time the Agency has taken such action. Read more>>
• Medium-Term Plan for the Reconstruction of Ukraine Will be Prepared in Cooperation with the EU: According to Vice President of the European Commission Valdis Dombrovskis, Ukraine will prepare a medium-term reconstruction plan in cooperation with the EU. The plan will bring together the necessary investments and reforms not only to help with reconstruction, but also to help with the green and digital transformation of the economy, as well as help with the reforms Ukraine needs to join the EU. Read more>>
• TotalEnergies Chief Claims EU Still Supports LNG Imports from Russia: The authorities of the EU countries agree to continue importing LNG from Russia, despite US pressure. This was stated in an interview with Le Journal du dimanche by Patrick Pouyanne, head of TotalEnergies. Pouyanne said that Total has a 20-year contract with Russia and if the company stops taking gas from Russia, they will still have to pay for it. Read more>>
• No Reason for FATF to Blacklist Russia, Says Russian Central Bank: Russia's Central Bank Governor Elvira Nabiullina said on Wednesday there were no reasons for Russia to be added to the global financial crime watchdog's blacklist. "The decision, if taken, would be politically motivated, but if such a decision is taken, it will of course have negative consequences for us," she said. FATF meeting started in Paris on June 19, however, it is not clear whether the group is going to revise the status of Russia at all. Read more>>

V. OTHER NOTABLE DEVELOPMENTS

• Bank of China Halts Yuan Transactions between Russian Clients and Western Lenders: On June 20, reports emerged that the Bank of China, a major Chinese lender, has started restricting transactions using the yuan between Russian clients and lenders in the US, the EU, Switzerland, and the UK, further curbing Russia’s ability to skirt Western sanctions. The restrictions affect transfers involving the Bank of China as the correspondent, or intermediary, bank moving money from Russia to third-party countries. In interviews with Russian news outlet RBC, Russian bank representatives said that the crackdown on intermediate yuan transfers was due to fears of secondary sanctions from the EU and US. Read more>> and Read more>>
• Australian Government Urged to ‘Enforce’ Sanctions over Coalminer Operating in Russia: On June 20, it was reported that calls have been growing for the Australian government to review the activities of Tigers Realm Coal, an Australian publicly listed coalminer that has been operating in Russia for more than a decade and continued to operate in the country for more than a year despite the invasion of Ukraine. The company was warned in April by the Department of Foreign Affairs and Trade (DFAT) that it could be in breach of Australian sanctions, and Foreign Minister Penny Wong has been urged not to extend permits to the company to continue sanctioned activities. Read more>>
• Canada Proposes Setting Up Trust Fund for Redistribution of Seized Russian Assets to Ukraine: On June 20, it was reported that a proposal was put forward for the Canadian government to create a trust fund for the redistribution of seized Russian assets to Ukrainians. The proposal was raised by the World Refugee & Migration Council and outlined in a paper on the eve of the Ukraine Recovery Conference, and which involved the establishment of a trust to manage the proceeds obtained from the sale of Russian assets. The advocacy group wants to encourage widespread adoption of this scheme, including other allies that are mobilizing support for reconstruction in Ukraine. Read more>>
• Zelenskyy Calls on Swiss Parliament to Allow Re-Export of Arms to Ukraine: On June 15, Ukrainian President Volodymyr Zelenskyy addressed members of the Swiss parliament, calling for the unblocking of weapon exports to Ukraine, according to reports. While thanking Switzerland for adopting the EU’s sanctions against Russia and providing humanitarian aid, he further said that export of military equipment for the protection and defence of Ukraine would be “pivotal,” stressing that the country is asking for arms deliveries so that it “can become a territory of peace again.” Read more>>
• Allies Pledge Billions for Ukraine Rebuilding in London Conference: On June 21, Ukraine’s allies, including the US, EU and the UK, pledged several billion dollars in non-military aid to rebuild the country’s war-ravaged infrastructure, fight corruption and help pave the country’s road to membership in the European Union, according to reports. Delegates from over 60 countries attended the Ukraine Recovery Conference in London, urging private-sector companies to invest and revive the Ukrainian economy. Read more>>
• Japan’s Mitsui Says No Plans to Exit Russia’s Sakhalin-2 LNG Project: On June 21, a senior executive of Japanese trading house Mitsui & Co says the company currently has no plans to withdraw from the Sakhalin-2 liquefied natural gas (LNG) project in Russia, according to reports. In an annual general meeting, Toru Matsui, Mitsui’s senior executive managing officer, said that they have decided last year to keep their stake in the project after consultation with the Japanese government, as the project supplies about 9% of Japan’s LNG imports. Read more>>
• NATO to Invite Ukraine into New Defense Council as Equal Member: On June 16, NATO Secretary Jens Stoltenberg said at a press conference in Brussels that NATO is planning to invite Ukraine in a new NATO-Ukraine defense council as an equal member, allowing the country and NATO allies to consult and decide on security issues on an equal basis. The details of the council will be announced next month at NATO’s summit in Vilnius, Lithuania. Meanwhile, NATO is also focused on a path to bring Ukraine closer to alliance membership, according to the Secretary. Read more>>