Following the recognition by Russian President Putin of the Ukrainian provinces of Donetsk and Luhansk as independent republics (and moving “peacekeeping troops” into those regions), the UK, EU and US have announced a first tranche of sanctions in response.

The US measures, (see our US briefing here), essentially block US persons from dealings with the Donetsk and/or Luhansk regions (the same US measures that apply in relation to Crimea).

UK measures

The UK measures announced today take a different approach, instead imposing asset freezes on:

• five Russian banks;
• three prominent Russian individuals

The targeted banks are:

• Bank Rossiya,
• IS Bank, 
• JSC GenBank, 
• PJSC Promsvyazbank
• Black Sea Bank for Development and Reconstruction

The targeted individuals are:

• Gennady Timchenko
• Boris Rotenberg
• Igor Rotenberg

These designations are a direct consequence of the UK's decision last week to broaden its Russia sanctions designation criteria¹. In themselves these measures are notable – all three of these individuals are prominent in Russia, extremely wealthy and close to Putin (Arkady Rotenberg is already designated), and the designation of banks is always significant in its effects. The key points for businesses to note are:

• These three individuals own (and/or may be said to control) some very significant entities. Any person to whom UK sanctions apply who deals with these persons, or with businesses owned/controlled by them now risks committing an offence. Businesses with Russian counterparties should recheck the ownership/control of those counterparties to ensure that they are not impacted by these designations.
• A designation of a bank can have particularly broad impacts; businesses should consider any direct or indirect association with these banks and, if there is any connection, consider whether it is viable to continue that relationship.
• All three of the individuals named, and four of the five banks named, were already US SDNs. While also making them UK-designated will increase the pressure on them (and businesses should take account of the UK designations), the impacts will not necessarily be felt by Russia, or by the individuals/entities concerned as anything more than a modest extension of measures already in place.

If there are further developments in Ukraine, it is widely expected that more measures will follow, although it will be for the UK Government to decide (likely in coordination with the US, EU and Canada) what developments trigger further rounds of sanctions. As to the measures, which may be considered in future rounds:

• The UK has identified strategic sectors of the Russian economy at which sanctions (both individual designations and sectoral measures) may be aimed: chemicals, construction, defence, electronics, energy, financial services, transport and digital technologies, indicating that they will impact "all companies and organisations of strategic importance to Russia".
• PM Johnson has also indicated that the package may include measures that would prevent Russian companies from trading in US Dollars or UK Pounds (but notably not Euros, notwithstanding that much Euro-clearing takes place in London). However, he noted that the biggest issue is "Russian hydrocarbons".
• The UK also looks set to use "Londongrad" – the class of influential Russians, including many close to Putin, who have invested much of their extensive wealth in London in property and businesses, often concealing their interests behind secretive companies in UK overseas territories – to apply pressure on President Putin. It has in the past week ended the "Tier 1 visa scheme" designed to attract wealthy businesspeople to the UK. Additionally, the government is reported to have prepared a reform of the laws relating to company and property registers, to increase transparency of the ownership of UK companies and property, which PM Johnson has said will "open up the Russian doll of property ownership and see who's behind everything" – something for which transparency campaigners and anti-financial crime groups have long since campaigned.

EU measures

The EU has yet to table and approve its formal sanctions measures, but it has issued a statement from the Presidents of the European Council and European Commission which outlined the core elements of an agreed package as being measures to target:

• those who were involved in the illegal Russian decision to recognise Donetsk and Luhansk;
• banks that are financing Russian military and other operations in those territories;
• the ability of the Russian State and government to access the EU’s capital and financial markets and services, to limit the financing of escalatory and aggressive policies; and
• trade from the two breakaway regions to and from the EU, to ensure that those responsible clearly feel the economic consequences of their "illegal and aggressive" actions.

We will be continuing to issue briefings following any further developments. If you would like advice in relation to any of these measures, or as to preparation for further measures, please contact our team listed under key contacts.

1. The UK recently adopted the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022, enabling it to impose targeted sanctions on a wider range of Putin associates than was previously possible.