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

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

Week of February 13, 2023

I. US SANCTIONS

• US Considering Further Action on Banks with Ties to Russia: In a February 14 interview with Reuters, the head of the State Department’s Office of Sanctions Cooperation James O’Brien said, “we are looking at additional banks and financial institutions to see how Russia deals with the outside world. It is very possible that there will be more action." He also noted in the interview that the US would increase its focus on sanctions enforcement. Read more>>
• White House Warns Ukraine Assistance May Slow: In a February 14 article in The Washington Post, unnamed White House officials told the newspaper that the administration is pushing the Ukrainian government to reach a turning point in the war by next spring. The source noted, “we can’t do anything and everything forever,” and added that comments related to the US supporting Ukraine “as long as it takes” were in reference to the duration of the conflict, not the amount of assistance. Read more>>
• President Biden to Travel to Poland: On February 10, the White House announced President Joe Biden will travel to Poland and will meet with President Andrzej Duda of Poland to discuss bilateral cooperation as well as our collective efforts to support Ukraine and bolster NATO’s deterrence. In addition, President Biden will also deliver remarks ahead of the one year anniversary of the Russian invasion of Ukraine and address the global community’s response. Read more>>
• State Department’s Conflict Observatory Releases Report on Child Relocation: On February 14, the State Department issued a new incident report detailing a network of Russian-run sites and processes to relocate thousands of Ukrainian children to areas under Russian control. The report identifies 43 separate facilities as part of the network. Read more>>
• Commerce, Justice Departments Launch Disruptive Technology Strike Force: On February 16, the Department of Justice and the Department of Commerce launched the creation of the Disruptive Technology Strike Force. The strike force’s work will focus on investigating and prosecuting criminal violations of export laws; enhancing administrative enforcement of U.S. export controls; fostering partnerships with the private sector; leveraging international partnerships to coordinate law enforcement actions and disruption strategies; utilizing advanced data analytics and all-source intelligence to develop and build investigations; conducting regular trainings for field offices; and strengthening connectivity between the strike force and the Intelligence Community. Russia was mentioned alongside China, Iran, and North Korea as “nation-state adversaries” that may be the focus of the Task Force. Read more>> 

II. EU SANCTIONS

• Commission President Makes Statement on 10^th Package of Sanctions against Russia: The European Commission detailed the content of the upcoming sanctions against Russia including (i) further export bans worth more than EUR 11 billion, to deprive the Russian economy of critical technology and industrial goods, (ii) further restrictions on the export of dual use goods and advanced tech goods, (iii) the listing of Putin's propagandists as well as additional military and political commanders (iv) new measures to prevent circumvention. Read more>>
• EU Set to Sanction Iranian Companies over Russia’s War in Ukraine: The European Union plans to sanction several Iranian companies for supplying armed drones to Russia, European Commission President Ursula von der Leyen said. Read more>>
• Russian Banks and Invasion Leaders in Focus as EU Debates New Sanctions: EU ambassadors meet in Brussels on Wednesday (15 February) to discuss a new batch of sanctions against Russia, with politicians, military leaders and four more Russian banks expected to be targeted. Read more>>
• Russian Banks and Exports Set to be Hit in New EU Sanctions: The EU is set to hit Moscow with new financial sanctions, trade curbs and a ban on Russian nationals serving on boards of critical European infrastructure companies such as power grids, EU diplomats and officials. Read more>>
• EU Working Group to Look at Using Frozen Russian Assets for Reconstruction of Ukraine: Under the leadership of the Swedish Presidency of the Council of the European Union, an EU Working Group will be set up to look at using frozen Russian assets for the reconstruction of Ukraine. Read more>>
• EU General Court Confirms the Restrictive Measures Adopted against a State-Owned Enterprise Managing the Airspace in Belarus: On 15 February 2023, the General Court stated that the State-owned enterprise Belaeronavigatsia could not reasonably have been unaware that its activities carried out in order to divert flight FR4978 to Minsk contributed to the repression of civil society and democratic opposition in Belarus. Read more>>
• Billionaire Deripaska Challenges Scope of Russia Sanctions: The billionaire shareholders of one of Europe’s largest construction companies are set to test the extent of Russian sanctions in an Austrian court case starting Wednesday. Read more>>
• Cyprus Axes Ships as EU Targets Dubai Sovcomflot Operations: The EU is looking to tighten measures against Sovcomflot’s operations which have continued to trade internationally in the wake of western sanctions levelled against the sanctioned Russian tanker giant. Cyprus government confirms final Sovcomflot-linked vessels will be removed as the EU looks to target Sovcomflot’s Dubai-based technical manager Sun Ship Management. Read more>>
• Commissioner Reynders and Prosecutor General of Ukraine Andriy Kostin Attend the Meeting of the Seize and Freeze Task Force: On 17 February 2023, the Commissioner for Justice, Didier Reynders, will meet with Andriy Kostin, Prosecutor General of Ukraine, to discuss the ongoing work to hold accountable those responsible for Russia's war crimes in Ukraine, as well as the EU sanctions regime and the work of the Freezing and Confiscation Task Force. Following this, Commissioner Reynders and Prosecutor General Kostin will attend the opening session of the task force, during which they will address the meeting. Read more>>
• Commission Approves EUR 217 Million Swedish Scheme to Support Electricity-Intensive Companies in the Context of Russia's War against Ukraine: The European Commission has approved a EUR 217 million (SEK 2.4 billion) Swedish scheme to support electricity-intensive companies in the context of Russia's war against Ukraine. The scheme was approved under the State Aid Temporary Crisis Framework. Read more>>
• Commission Approves Amendment to a Czech Scheme to Support Companies in the Context of Russia's War against Ukraine: The European Commission has approved an amendment to an existing Czech scheme to support companies in the context of Russia's war against Ukraine. The amendment was approved under the State aid Temporary Crisis Framework. Read more>>
• Commission Approves EUR 32 Million Walloon Aid Scheme to Support the Health and Social Assistance Sectors in the Context of the War in Ukraine: The Commission has approved a EUR 32 million Walloon aid scheme to support the health and social assistance sectors in the context of the war in Ukraine. The scheme was approved under the Temporary Crisis Framework. Read more>>
• Commission Approves EUR 116 Million Belgian Scheme to Support Companies in the Context of Russia's War against Ukraine: The European Commission has approved a EUR 116 million Belgian scheme to support companies in the context of Russia's war against Ukraine. The scheme was approved under the State aid Temporary Crisis Framework. Read more>>

III. UK SANCTIONS

• Understanding OFSI Webinar: OFSI is holding an introductory webinar at 10am (UK time) on Tuesday February 28, 2023. Representatives from across OFSI will explain its role and powers in its mission to ensure that financial sanctions are properly understood, implemented and enforced in the United Kingdom. Read more>>
• Solicitors in UK Warned Not to Act as ‘Hired Guns’ to Silence Critics of Super-Rich: On February 16, 2023, it was reported that law firms have been warned by their regulator that they should not act as “hired guns” to silence critics of the wealthy, amid a spate of allegations of abusive litigation by Russian oligarchs since the invasion of Ukraine. The Solicitors Regulation Authority (SRA), which regulates solicitors in England and Wales, has revealed it is investigating 40 cases of alleged strategic lawsuits against public participation. There are “significant concerns being raised about solicitors making meritless claims on behalf of oligarchs to stifle public discourse about corruption or money laundering”, it said in a report published this week. Russia’s invasion of Ukraine has heightened scrutiny of the super-rich using litigation to try to silence critics and journalists reporting on allegations of corruption. That has in turn increased scrutiny by MPs and campaigners of British lawyers who act for wealthy foreign clients, including those subject to financial sanctions from the UK or its allies. The SRA also noted that lawyers have an obligation to report potential Slapps to the regulator. Read more>>
• UK Labour Leader Keir Starmer Visits Kyiv to Meet Zelenskyy: On February 16, 2023, it was reported that UK Labour party leader, Keir Starmer, has travelled to Kyiv to meet President Volodymyr Zelenskyy to emphasise his party’s commitment to backing action to arm the country against a renewed offensive by Russia. Starmer said the UK’s position on Ukraine “will remain the same” if there is a change of government next year, as he travelled to the suburbs of Irpin and Bucha where Russia committed significant atrocities last year as they were forced back by Ukrainian forces. Starmer told Reuters: “He said he had travelled to Ukraine to express solidarity with the country and to emphasise the need to pursue justice and reparations against perpetrators.” Read more>>
• UK and Poland Agree Ukraine Support Must be Stepped Up: On February 16, 2023, it was reported that Britain’s prime minister, Rishi Sunak, and Poland’s president, Andrzej Duda, have agreed on the importance of stepping up support to Ukraine in the coming weeks, Sunak’s office said. Sunak met with Duda in Downing Street with talks on European security and support for Kyiv high on the agenda. The Polish leader’s visit comes after Nato defence ministers met in Brussels earlier this week, and ahead of the Munich Security Conference this weekend. The meeting comes amid pressure from Ukraine for fighter jets, something Downing Street has said would require agreement with international allies. Read more>>
• U.K. Defense Companies Reportedly in Talks about Setting up Production Facilities In Ukraine: On February 11, 2023, it was reported that U.K. defense companies are in talks with officials in Kyiv about setting up joint ventures in Ukraine to produce arms and vehicles. The report comes just days after Ukrainian President Volodymyr Zelenskyy met with British Prime Minister Rishi Sunak in London to discuss more military aid. Local production would reduce Ukraine’s need for Western military aid but such factories would be prime targets for Russian forces, experts said. Read more>> and Read more>> 
• Amendments to OFSI’s General Licences (GLs): 
  • On February 14, 2023, the GL regarding Russian travel was amended to include that a UK Person may purchase tickets from South Caucasus Railway CJSC for passenger rail journeys between Armenia and Georgia and within either of those two countries. A UK Person, Relevant Institution or DP may carry out any activity reasonably necessary to effect the purchase of tickets for flights or rail journeys in accordance with the GL. Read more>>
  • On February 13, 2023, the GL regarding Truphone telecoms services expired. Persons can no longer allow Truphone Limited to make or receive or receive payments, subject to conditions, for the purposes of continuing to provide Services under existing arrangements. Read more>>
  • On February 13, 2023, the GL regarding the continuation of business of Evraz Plc’s North American Subsidiaries was extended. This enables a Person to continue business operations involving the North American Subsidiaries including, but not limited to: payments to or from the North American Subsidiaries under any obligations or contracts; payments to or from any third party under any obligations or contracts; and receipt of payments made by the North American Subsidiaries for audit services. Read more>>

IV. RUSSIA/UKRAINE SANCTIONS

• Ukraine Adds 200 Entries to the Sanctions List: On 12 February, Ukraine extended sanctions to 200 new individuals, including representatives of the Russian government, state agencies, political parties and government-owned enterprises. The list of sanctioned individuals includes multiple representatives of the Russian state-owned company Rosatom, which operates in the nuclear sector. Read more>>
• Ukraine Recognizes Wagner Group as an International Criminal Organization: The Ukrainian Parliament adopted a resolution recognizing Russian organization Wagner Group – a private military company – as an international criminal organization. The Resolution states that Wagner Group is fully controlled by the Russian government, uses internationally prohibited methods of war, contributes to genocide in Ukraine and is involved into war crimes, such as mass executions, kidnapping and attacks on cultural, medical and educational facilities not only in Ukraine, but also in some African and Middle Eastern states. Ukrainian Parliament addressed the UN, EU and NATO with a request to recognize Russian private military companies (Wagner Group, Cossacks, etc.) as terrorist organizations. Read more>>
• Ukraine Plans to Auction Confiscated Russian Assets: The Cabinet of Ministers of Ukraine adopted a Regulation, which sets the rules for the sale of confiscated Russian assets and property. Ukraine froze and confiscated hundreds of objects which belonged to the Russian government or Russian oligarchs. The Government plans launch an open and transparent sale of this property at auctions. Read more>> 
• Ukraine Calls on UN, Turkey to Prevent Russia from Obstructing Grain Deal: On February 15, 2023, it was reported that Ukraine appealed to the United Nations and Turkey to press Russia to immediately stop hindering Ukrainian grain shipments that supply millions of people and not to use the food as a weapon. The agreement was extended by a further 120 days in November and is up for renewal again next month, but Russia has signalled that it is unhappy with some aspects of the deal and asked for sanctions affecting its agricultural exports to be lifted. Russia's agricultural exports have not been explicitly targeted by Western sanctions, but Moscow says blocks on its payments, logistics and insurance industries are a "barrier" to it being able to export its own grains and fertilisers. Read more>>
• Ukrainian Government Simplifies Imports for Military Goods: The Ukrainian Government adopted a Regulation that will speed up and facilitate import of military goods into Ukraine. The new Regulation significantly extends the list of military and dual-use goods that can be imported by individuals and legal entities without the permission of the State Export Control Service. The list of such goods now includes UAVs and spare parts, night vision devices, military optical sights, anti-radio equipment, and radio field generators. Read more>>
• Ukraine Calls on ECB to Facilitate the Withdrawal of European Banks from Russia: The head of the National Bank of Ukraine urged the head of the European Central Bank, Christine Lagarde, to facilitate the withdrawal of European banks from the Russian market. He added that public data on the activities of European banks in Russia is enough to see that the dynamics of their activities are rather sluggish. Some banks, on the contrary, are increasing their activity in certain areas. Read more>>
• Zelenskyy Reiterates Invitation for President Biden to Visit Ukraine: On February 15, 2023, President Volodymyr Zelenskyy reiterated Kyiv's invitation for US President Joe Biden to visit Ukraine. When asked by a reporter if he plans to meet with the American president anytime soon, Zelensky said, "President Biden and I meet occasionally. You know that we have invited the President. I think he will be happy to visit Ukraine if he has the opportunity. That would be an important signal to support our nation… Nevertheless, today there are various means of communication with the President of the United States," Zelenskyy added. "We are grateful to them for their great help." Read more>>
• Elon Musk Says SpaceX Restricted Internet in Ukraine to Prevent Escalation: On February 13, 2023, it was reported that SpaceX's recent restriction on the Ukrainian military's use of its satellite internet service for drone control was to prevent the conflict from escalating into a world war, according to Elon Musk. Answering a request from a former NASA astronaut to restore full access to the internet for Ukrainian forces, SpaceX CEO Musk tweeted: "Starlink is the communication backbone of Ukraine, especially at the front lines, where almost all other internet connectivity has been destroyed. But we will not enable escalation of conflict that may lead to WW3." Read more>>
• Putin’s War Is Crippling Ukraine’s and Russia’s Economy: On February 16, 2023, it was reported that the cost to both sides will turn out to be intolerably high. The Bloomberg consensus on Russia’s GDP in 2023 is zero growth, compared with an expansion of 2% for Ukraine. That’s because Ukraine has managed to keep its infrastructure running despite the fighting. And if it wins back some agricultural land and natural resources, it can increase exports, which for now have stabilized at about half their pre-war level. Russia’s prospects for economic improvement depend on the success of its efforts to replace imports with local products. Ukraine’s economic decline has been driven by horrendous physical destruction. Russia has suffered little physical damage, with any economic toll coming mostly from sanctions. Those could be lifted following some kind of peace agreement—in theory making it easier for Russia to recover. Read more>>
• Russian Energy Official Slams Ukrainian Sanctions: On February 13, 2023, Renat Karchaa, an advisor to the chief executive of Russia’s Rosenergoatom nuclear power plant operator, told TASS that Kiev’s sanctions will not affect the work of Russia’s Rosatom state nuclear energy corporation. "Sanctions make sense only if they influence some processes. First, the Zaporozhye Region and the city of Energodar are part of Russia. Second, Russia’s ownership of the Zaporozhye Nuclear Power Plant is a settled matter, enshrined in the Russian president’s decree. Third, Russia ensures nuclear security at the facility. The sanctions can affect neither of the three aspects," he explained. Ukrainian President Volodymyr Zelenskyy earlier enacted the National Security and Defense Council’s decision to impose sanctions on 200 individuals, including Karchaa and the Zaporozhye Nuclear Power Plant’s Director Yury Chernichuk, as well as other Rosatom employees. Read more>>
• Russia Added to Black List of EU Tax Jurisdictions: The inclusion of Russia on the EU’s list of countries that do not cooperate with the EU authorities was explained by Moscow's unwillingness to resolve issues related to the special regime for international companies. EU member states are entitled to apply certain measures to the non-cooperating states. In particular, transactions with companies from such countries are subject to strict control, tax authorities may disregard the deductions of expenses incurred in these jurisdictions, and payments to such jurisdictions may be subject to a withholding tax. Read more>>
• Russia to Cut Oil Production by 500 Thousand Barrels per Day: According to Russian Deputy Prime Minister Alexander Novak, Russia will reduce production "voluntarily" by 5% in March, to help "restore market conditions."Read more>>

V. OTHER NOTABLE DEVELOPMENTS

• New Zealand Sanctions Iranian Entities Supplying Drones to Russia: On February 15, New Zealand Foreign Minister Nanaia Mahuta announced that the country had imposed sanctions on eight Iranian individuals and entities that have supplied drones to Russia. The designated entities and individuals will be subject to asset freezes, travel bans, and restrictions on commercial activity with anyone in New Zealand. Read more>>
• Swiss Justice Ministry Opposes Confiscation of Russian Assets: Amid debate over whether to confiscate Russian assets frozen by sanctions, the Swiss Justice Ministry released a report on February 15 stating, “the confiscation of frozen private assets is inconsistent with the Federal Constitution and the prevailing legal order and violates Switzerland's international commitments." The Swiss Federal Council added, after the release of the report, “Support for Ukraine will continue, independent of the discussions on frozen assets." Read more>> 
• Shipping Data Indicates Russian Oil Diverted to Africa, Asia: On February 14, Reuters published an analysis of recent Refinitiv oil shipping data, issued after the EU’s embargo on Russian oil products went into effect on February 5. The data indicates that the main bulk of low-sulphur diesel and gasoil cargoes from the Russian Black Sea ports Tuapse and Novorossiisk are heading towards Turkey, as well as to Oman, Togo and Tunisia, with sporadic shipments to Morocco, Algeria, Ghana, Tunisia, Brazil, and Saudi Arabia. Read more>> 
• Credit Suisse Freezes $19 Billion in Russian Money: On February 12, SonntagsZeitung reported that Credit Suisse had frozen $19 billion in Russian in Russian assets as a result of the implementation of Western sanctions. Read more>>
• Japanese Foreign Minister to Invite Ukrainian Counterpart to Upcoming G7 Foreign Minister’s Meeting: On February 16, Japanese Foreign Minister Yoshimasa Hayashi said that he would invite his Ukrainian counterparty to the upcoming G7 foreign Minister’s meeting in Germany on February 18. Japan is the organizing country of the meeting, and the G7 summit to occur later this year. Read more>>