UK extends asset freeze designations following new powers and aligns export restrictions with G7 allies | White & Case srl

Written by our Global Sanctions Team

The UK significantly increased the number of sanctions designations on March 15, 2022, helped in part by new powers granted under the Economic Crimes (Transparency and Enforcement) Act, which came into force early this morning. The addition of wealthy individuals, politicians and members of the Federation Council of the Russian Federation to the asset freeze list follows the designation of 386 members of the State Duma, Roman Abramovich and others last week.

The UK also scrapped Russia’s most favored nation (“MFN”) status, proposed new export bans on luxury goods and increased additional tariffs on a wide range of Russian goods and Belarusians..

New Powers

The Economic Crimes (Transparency and Punishment) Act (the “ECA“)1 entered into force early on March 15, 2022. This legislation introduces2 a new registry of foreign entities, measures to strengthen unexplained wealth orders, and reforms that will likely step up enforcement of sanctions. Significantly, it also makes it easier and faster for the UK government to impose sanctions, especially for people already sanctioned by other countries (US, EU, Australia and Canada).

New UK sanctions

More than 370 Russian and Belarusian individuals were added to the UK’s asset freeze list on March 15, 2022, the vast majority of which resulted from the new powers available under the EAC, including 150 members of the Federation Council of the Russian Federation and individuals and entities including:3

  • Alexey Mordashov (majority shareholder of the steel company Severstal)
  • Andrey Melnichenko (founder of EuroChem Group)
  • Viktor Vekselberg (owner of Renova Group)
  • Alexander Ponomarenko (Chairman of the Board of Sheremetyevo)
  • Dmitry Pumpyanskiy (owner and chairman of OAO TMK)
  • Vadim Moshkovich (Chairman of the Board of the Rusagro Group)
  • Dmitry Medvedev (Vice Chairman of the Security Council of Russia)
  • Mikhail Mishustin (Prime Minister of Russia)
  • Sergei Shoigu (Russian Defense Minister)
  • Dmitry Peskov (Putin’s press secretary and Kremlin spokesman)
  • Maria Zakharova (Director of the Information and Press Department of the Ministry of Foreign Affairs of the Russian Federation)
  • Gas industry insurance company SOGAZ
  • Geopolitics
  • Internet research agency
  • New Perspectives from the East
  • Oriental Review
  • United World International

Also on March 15, 2022, the UK used its standard procedure to add four additional people to the asset freeze list:4

  • Mikhail Fridman (founder of Alfa Bank and shareholder of LetterOne)
  • Petr Aven (previously chairman of Alfa Bank and co-founder of LetterOne)
  • German Khan (business partner of Aven and Fridman in Alfa Bank and LetterOne)
  • Oleg Matveychev (member of the Russian Duma and propagandist)

This brings the total number of individuals designated since Russia began operations in Ukraine to more than 1,000 and follows significant designations made late last week, including the addition (on March 11, 2022) of 386 members in the State Duma.5 for their support of treaties recognizing the independence of Luhansk and Donetsk, and seven people6 March 10, 2022:

  • Roman Abramovich (owner of Chelsea FC and shareholder of steel giant Evraz and Norilsk Nickel)
  • Oleg Deripaska (stakeholder of the En+ group)
  • Igor Sechin (general director of Rosneft)
  • Andrey Kostin (President of VTB Bank)
  • Alexey Miller (CEO of Gazprom)
  • Nikolay Tokarev (president of Transneft)
  • Dmitry Lebedev (Chairman of the Board of Directors of Bank Rossiya)

Two Russian individuals were also added to the UK assets freeze list on March 3, 2022:

  • Igor Ivanovich Shuvalov (former Deputy Prime Minister of Russia and current Chairman of the Board of VEB)
  • Alisher Burkhanovich Usmanov (a prominent businessman close to President Putin)

The asset freeze means that all funds and economic resources which are owned, held or controlled by such persons and which are subject to UK jurisdiction must be frozen and no funds or economic resources may be made available (directly or indirectly) of or for the benefit of such persons, unless permitted by license issued by HM Treasury. “Economic resources” are broadly defined to include all assets that can be used to obtain funds, goods or services – for example, real estate assets.

It is important to note that the asset freeze extends to entities owned or controlled (directly or indirectly) by these designated persons. The funds and economic resources of these entities must also be frozen, and the funds and economic resources cannot be made available to these entities.

Announced removal of MFN status and other trade barriers

On March 15, 2022, the UK announced that it would follow other G7 members in withdrawing MFN status from Russia, depriving Russian exports of the benefit of WTO tariff commitments. The UK announcement adds that Belarus will also be subject to the withdrawal of MFN duties.7

The United Kingdom has also published a list of products of Russian and Belarusian origin to which it will apply a 35% tariff.8 The list covers 26 product headings according to the Harmonized System commodity classification. These products range from fish and cereals to beverages, spirits and vinegar, wood, iron and steel, cement, fertilizers, machinery, rubber tires, railway or tram containers and works of art. The UK says the listing applies the new tariffs to £900m of Russian imports.

It’s unclear when these rates will go into effect, but it will likely be in the next few days.

The UK also announced that it would ban the export of “luxury goods” to Russia, again in line with commitments made by all G7 members. There is not yet a list of affected exports, but the UK gives as examples of products that may be affected luxury vehicles, high-end fashion and works of art. The UK announcement says the export ban will come into force “soon”.9

Legislation targeting aviation

On March 9, 2022, the UK introduced new legislationten targeting the Russian aerospace sector, including:

  • Aviation-specific sanctions, which target aircraft in the same way as ships have been targeted under maritime sanctions.11 This legislation includes, among other provisions, a prohibition on aircraft registered in Russia or otherwise owned, chartered or operated by a designated person/entity or a “Russia-related” person/entity, from overflying or landing in the United Kingdom. United ; and powers to detain Russian aircraft.
  • Changes to trade restrictions to prohibit:
    • The export of aeronautical and space goods and technologies to or intended for use in Russia; and
    • The provision of insurance and reinsurance for aeronautical and space goods/technology to a “Russia-related” person/entity or for use in Russia.

General licenses

A number of blanket licenses have been issued and updated over the past week, including the following:

On 10 March 2022, following the designation of Roman Abramovich, the OFSI issued a general license allowing Chelsea Football Club to continue to engage in football-related activities. These include the reasonable costs necessary for the club to organize the fixtures, the remuneration of all club employees (including players and coaching staff) and various payment obligations prior to March 10, 2022.12

On March 9, 2022, the Joint Export Control Unit of the Department of International Trade (the “ECJU”) issued a general license authorizing, subject to certain exceptions, until March 28, 2022, the supply of insurance and reinsurance relating to aeronautical and space assets/technology (under contracts entered into before March 8, 2022):

  • Where the supplier;13
    • have not reinsured any of their obligations to provide such insurance services prior to March 8, 2022; Where
    • have reinsured any of their obligations to provide such insurance services prior to March 8, 2022 and none of such reinsurance coverages has under applicable law been rendered unenforceable, suspended, frustrated or prohibited by sanctions applicable; Where
    • if the insurance commitments they reinsure have not, under applicable law, been rendered inapplicable, suspended, frustrated or prohibited by applicable sanctions.

In addition, on March 9, 2022, the OFSI published a notice regarding the general license authorizing phase-down activities related to VTB. This clarifies that the General License does not contain a requirement that funds which become payable to VTB in connection with a person’s liquidation of any transaction they have with VTB must be paid into a frozen account.

On March 4, 2022, the OFSI issued two general licenses allowing:

  • A 30-day liquidation period for positions involving the following five banks: Bank Otkritie, Promsvyazbank, Bank Rossiya, Sovcombank and VEB. This allows a person to terminate any transaction to which they are a party, involving any of the above-mentioned banks, any subsidiary of the above-mentioned banks or JSCB Novikombank and allows any activity reasonably necessary to achieve this.15
  • The provision of financial services to Sberbank, or its subsidiaries, with the aim of terminating this activity. Any activity reasonably necessary for this purpose may be undertaken.16

1 See here.
2 See here.
3 See here and here.
4 See here.
5 See here.
6 See here.
7 See here.
8 See here.
9 See here.
10 See here.
11 See here.
12 See here.
13 See here.
14 See here.
15 General License – INT/2022/1295476; See here.
16 General License – INT/2022/1298776; See here.

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