Sanctions Summary - July 31 (with Turza Comment)

On July 31, 2014, the Council of the European Union announced the imposition of sectoral sanctions on five Russian financial institutions, including Russia's largest bank, Sberbank, in response to Russia's "actions destablising the situation in eastern Ukraine." The new EU sanctions, which are aimed at "restrict[ing] Russia's access to EU capital markets," also target VTB Bank, Gazprombank, Vnesheconombank ("VEB") and the Russian Agricultural Bank - all of which are majority-owned Russian state banks. VTB, Gazprombank, VEB and the Russian Agricultural Bank were sanctioned previously by the United States. Cadwalader's table summarizing the updated Sectoral Sanctions List can be found here.

The sanctions specifically prohibit EU nationals and companies from buying or selling new bonds, equity or similar financial instruments with a maturity exceeding 90 days that are issued by major state-owned Russian banks, development banks, their subsidiaries outside the EU and by those acting on their behalf. Brokering is also prohibited. The newly promulgated regulations can be found here. The sanctions enter into force on August 1, 2014 and are valid for one year.

Turza Comment: The EU's sectoral sanctions bring it into closer alignment with U.S. efforts to pressure the Russian Federation to withdraw its support for separatists operating in eastern Ukraine. The inclusion of Sberbank is particularly notable, not only because of its importance to the Russian economy - it is the country's largest recipient of deposits - but also because it is Europe's third-largest bank. In addition, the United States has not yet targeted Sberbank for sanctions.

See: EU Announcement; Updated Sectoral Sanctions List; Text of New Regulations.