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The European Unions 25 February wave of sanctions build on, and significantly expand, its existing sanctions on Russia, imposing wide-ranging restrictions on the Russian economyincluding in respect of Russias access to financial and capital marketsand the oil refining, aviation, and space sectors. More sanctions from the European Union are expected in the coming days, along with announcements on the disconnection of certain Russian banks from the SWIFT system.

The February 25 sanctions package was adopted by Council Regulation (EU) 2022/328 and came into effect on 26 February 2022. These sanctions build on the regime imposed on Russia by the European Union in 2014 (Council Regulation (EU) No 833/2014), together with those adopted by the European Union on 23 February 2022. The new sanctions both strengthen existing restrictions and impose additional restrictions on the trade in goods and associated services to significant sectors of the Russian economy. The new trade sanctions apply irrespective of whether the goods or technology originate in the European Union.

The European Union has imposed new prohibitions on the sale, supply, transfer, or export to any Russian person or entity or for use in Russia (directly or indirectly) of specific goods and technologies suited for use in oil refining, together with restrictions on the provision of certain related services and financing. A list of the specified items is set out at the new Annex X to Regulation 833/2014.

There is a temporary exemption (or wind-down period) that effectively allows EU persons to continue to perform a contract (or ancillary contracts necessary for the execution of that contract) until 27 May 2022, provided that the contract was entered into before 26 February 2022. Furthermore, specific licences can be sought for the prevention or mitigation of events likely to have a serious and significant impact on human health and safety or the environment.

These new restrictions are in addition to the previous restrictions imposed on Russias energy sector in relation to oil exploration and production and associated services, which restrictions remain fully in effect.

A number of new restrictions have been introduced in relation to Russias aviation and space sector, including prohibitions on

A carve-out has been included which is intended to allow a short window (until 28 March 2022) within which EU persons and entities can execute contracts concluded before 26 February 2022 (and ancillary contracts necessary for the executions of such contracts) that are otherwise prohibited by paragraphs (i) and (iii) above. Notably, the carve-out does not extend to the insurance and reinsurance provisions or the activities in paragraph (ii) above.

A new prohibition introduced on 28 February 2022 pursuant to Regulation 2022/334 prohibits any aircraft operated by Russian air carriers, including as a marketing carrier in code-sharing or blocked-space arrangements; any Russian-registered aircraft; or any non-Russian-registered aircraft which is owned or chartered, or otherwise controlled by, any Russian person or entity from landing in, taking off from, or overflying the territory of the European Union. A member state may provide a licence on humanitarian grounds or for a purpose that is consistent with the objectives of Regulation 833/2014.

The European Union has expanded the pre-existing restrictions on the export of controlled dual-use items to Russia by removing the previous requirement that the item be intended for military use and/or a military end user, i.e., there is now a blanket ban on the sale, supply, transfer, or export of dual-use items (and certain associated services) to any Russian person or for use in Russia (subject to certain derogations). Dual-use goods are items that have both a civilian and a military application; they are identified in Council Regulation (EU) 2021/821.

The new sanctions further prohibit the sale, supply, transfer or export of items (and certain associated services) to Russian persons, or for use in Russia, that may contribute to Russias military and technological enhancement, or the development of the defence and security sector. An extensive list of these items is included at the new Annex VII to Regulation 833/2014 and includes items related to encryption, electronics, telecoms, lasers, navigation and avionics, and computers/electronics.

Certain exemptions apply, including for humanitarian, medical, or pharmaceutical purposes; non-governmental cybersecurity; software updates; temporary use by news media; and personal use. Licences will not normally be required where the exemptions apply. However, it may be necessary in some circumstances to declare any impacted items on customs declaration forms and to inform the competent authority/authorities of the reliance on an exemption.

Specific licences may also be available depending on the items and purpose for which they are intended.

The European Union has imposed additional restrictions on Russias access to capital marketsincluding extending restrictions on dealings involving transferable securities and money market instruments and/or new loans or credit to four additional Russian banks (Alfa Bank, Bank Otkritie, Bank Rossiya, and Promsvyazbank) and to eight state-owned companies (Almaz-Antey, Kamaz, Novorossiysk Commercial Sea Port, Rostec, Russian Railways, JSC PO Sevmash, Sovcomflot, and United Shipbuilding Corporation). These entities are identified at new Annexes XII and XIII of Regulation 833/2014.

Furthermore, the existing measures have been strengthened so that there will be no minimum maturity limit in respect of (i) transferable securities and money market instruments issued after 12 April 2022; and (ii) new loans and credit after 26 February 2022.

From 12 April 2022, it will also be prohibited to list and provide services on trading venues registered or recognized in the European Union for the transferable securities of any entity established in Russia and with more than 50% public ownership.

The new sanctions package also contains further prohibitions relating to transferable securities.

EU financial institutions are prohibited from accepting deposits of more than EUR 100,000 euros (approximately $112,000) from Russian nationals, residents, or entities. In addition, they must report any deposits in excess of these limits by no later than 27 May 2022 and will be required to provide an update every 12 months.

Certain exemptions apply, including deposits necessary for lawful trade in goods and services between the European Union and Russia, as well as individuals basic needs, civil society activities, humanitarian purposes, reasonable legal/professional fees, and certain extraordinary expenses (although licences will need to be obtained in relation to most of the above).

Further, while nationals and residents of EU member states are exempt from these measures, financial institutions must provide details of deposits exceeding these limits held by Russian nationals or residents who have acquired EU member state citizenship or EU residence rights through an investor citizenship or residence scheme.

The European Union has prohibited the provision of public financing or financial assistance for trade with, or investment in, Russia.

Exemptions are available for (i) binding financing or financial assistance commitments established prior to 26 February 2022; (ii) the provision of public financing or financial assistance up to the total value of 10,000,000 euros (approximately $11,200,000) per project to small and medium-sized enterprises established in the European Union; and (iii) the provision of public financing or financial assistance for trade in food and for agricultural, medical, or humanitarian purposes.

In addition to the restrictions above, following Council Decision (CFSP) 2022/331, the European Union has also designated an additional 99 individuals, including the Russian president and the foreign minister. This list also includes certain Belarusian persons identified as having participated in or supported Russias military activities in Ukraine.

It is already anticipated that the European Union will impose further sanctions against Russia in the coming weeks, including significant further designations against those seen as either benefiting from or supporting those deemed responsible for Russias actions in Ukraine.

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Update: European Union Agrees on Further Sanctions on Russia - JD Supra