Updated: Apr 17, 2022
The United Kingdom has announced the seventh amendment to its sanctions on Russia. What decision was made, and how does it influence businesses?
The UK recently announced that it was planning to implement new sanctions on Russia, with the most notable being the freezing of assets of some Russian state-owned businesses and individuals due to Russia's role in the crisis in Ukraine, as well as its annexation of Crimea.
Sanctions are not something businesses should take lightly; they can disrupt business operations and cause companies financial losses in the long run if not carefully prepared for and addressed. To learn more about how businesses can protect themselves against sanctions, check out our guide on how to prepare your business against sanctions here!
The current state of UK-Russia relations
The current relationship between Britain and Russia has been somewhat of a rollercoaster. Even before the war in Ukraine in 2022, the relationship plummeted to a low point in 2006 when former Russian security officer Alexander Litvinenko was poisoned with radioactive polonium-210 while drinking tea at a meeting in London. Following international outrage and demands for an investigation, President Vladimir Putin responded by banning imports of British food products. Since the outbreak of war in Ukraine in 2022, instigated by Russia, a wide range of sanctions have been imposed against Russia. Businesses need to look out for ever-changing regulations and rules. Trading with Russia is close to impossible now, and those that try face bureaucracy and the risk of severe penalties.
Introduction to UK sanctions against Russia
The UK has issued several rounds of economic sanctions against Russian individuals, companies, banks and government officials, first as part of the EU in response to Russia’s annexation of Crimea in March 2014 and its continued support for separatists in eastern Ukraine. Since 2022, the UK has issued a wide set of sanctions in form of amendments to The Russia (Sanctions) (EU Exit) Regulations 2019 which has been amended in 2022 more than five times.
UK economic sanctions (7th amendment)
After witnessing more horrendous abuses on Ukrainian civilians in the first week of April 2022, the United Kingdom (U.K.) deliberated and agreed on a significant hike in sanctions on Russia. The U.K. subsequently introduced further sanctions against Russia by publishing the Russia (Sanctions) (EU Exit) (Amendment) (No. 7) Regulations 2022.
The new punishments in overview:
The largest Russian bank's assets have been frozen
Fresh UK foreign investment into Russia has been halted.
UK aims to phase out all Russian coal and oil imports by the end of 2022
Restrictions on state-owned firms
A ban on important sectors, including a ban on the importation of iron and steel goods
A prohibition for the Russian Military concerning the purchase of the quantum and sophisticated material technology developed in the United Kingdom.
Restrictions on transportation
Under the British criminal code, no Russian aircraft are permitted to land or fly in the UK. This provision is augmented by the addition of UK authorities taking ownership of any aircraft operated by sanctioned individuals, even if they are not on board. Additionally, Russian ships are now barred from landing in British ports.
Designating more persons: Freezing assets and travel bans
Some of these economic and financial restrictions have been in place since 2014. Back then, the EU, US and Canada imposed some of these measures in response to Russia’s illegal annexation of Crimea, while others were added in response to Russia’s destabilizing role in Ukraine. The most recent expansion was a direct result of evidence that Russian military forces had engaged in attacks against civilian targets in Ukraine. All told, more than 500 individuals and nearly 40 companies are now "designated" aka subject to an asset freeze and travel ban by several countries. Doing business with them is, essentially, prohibited.
In the April 2022 sanction package, a further eight billionaires are now "designated" and are subject to asset freezes and travel restrictions:
Viatcheslav (Moshe) Kantor is the major stakeholder of Acron, a fertiliser corporation of critical strategic importance for the Russian government.
Andrey Guryev is a well-known close friend of Vladimir Putin and the creator of PhosAgro, an important strategic enterprise that manufactures fertilisers.
Sergey Kogogin is the director of Kamaz, a builder of vehicles and buses for the Russian military.
Sergey Sergeyevich Ivanov is the President of Alrosa, the world's largest diamond manufacturer, which the UK has also sanctioned.
Leonid Mikhelson, the founder and CEO of Novatek, a significant Russian natural gas company, has an estimated net worth of £18 billion.
Andrey Akimov, CEO of Gazprombank, Russia's third largest bank
Aleksander Dyukov is the CEO of GazpromNeft, Russia's third largest and primarily state-owned oil company.
Boris Borisovich Rotenberg is the son of SGM, Russia's largest gas pipeline producer. The Rotenberg family is well-known for its strong ties to Putin, and several members of the family have previously been sanctioned.
What is an asset freeze?
An asset freeze prohibits anybody in the United Kingdom, or any UK national or registered corporation elsewhere in the world, from interacting with any funds or economic resources owned, possessed, or controlled by the designated individual. It will also prohibit finances or economic resources from being supplied to or for the advantage of the designated individual.
What is a travel ban?
A travel ban implies that the designated person must be denied entry or stay in the United Kingdom, making the individual an excluded person under section 8B of the Immigration Act 1971.
What are 'designated persons'?
Under The Russian Sanctions and Money Laundering Act 2018 (Commencement No. 4) Order 2018, certain individuals are now ‘designated persons’ in relation to a number of jurisdictions, including Russia. This means that they have been identified as being involved in activities that threaten UK national security or are connected with a serious crime within specified jurisdictions. In particular, it is an offence to deal with funds belonging to, or owned, held or controlled by a designated person; enter into transactions involving funds belonging to, or owned, held or controlled by a designated person; make funds available where you know that those funds will be used in connection with transactions involving designated persons; make the property available for use by a designated person; provide financial services relating to the property where you know that such property is owned, held or controlled by a designated person; provide any financial service for purposes connected with an asset freeze order made under Part 5 of The Anti-Money Laundering and Counter-Terrorism Financing Act 2010.
Who will be affected by the latest round of UK economic restrictions?
The latest round of economic restrictions from UK Prime Minister Boris Johnson includes a high number of individuals and businesses, who will see their dealings with British companies limited. In addition to state-owned banks and energy companies, numerous Russian government officials have been hit by travel bans, as well as firms considered to be cronies or close allies of President Putin. This will affect many UK businesses in different ways. For example, oil giant BP has been banned from signing any new contracts with Rosneft, while Rolls-Royce is prohibited from exporting engines for use in military helicopters and planes to Russia. Many other firms are likely to face increased costs when it comes to hiring staff or arranging to finance in Russia.
Some may also find that they are unable to export products that contain components made in Russia. Businesses should carefully consider whether they could be affected by these sanctions before taking any action that could result in breaking them.
How we can help
Customs Manager Ltd helps you to navigate sanctions successfully. We advise on the latest legislation and how it impacts you. We help design internal compliance programmes, and we screen for restricted parties for you. We train on sanctions to make sure you are up to speed with the latest rules and regulations. You can also follow our online training on sanctions. Get in touch to learn more.
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The Russia (Sanctions) (EU Exit) Regulations 2019 came fully into force on 31 December 2020. And: