UK expands asset freeze designations following new powers, and aligns export restrictions with G7 allies

Authored by our Global Sanctions, Export Controls and Customs Teams

The UK significantly increased the number of sanctions designations on 15 March 2022, helped in part by new powers granted under the Economic Crime (Transparency and Enforcement) Act, which came into force early in the 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 has also removed Russia's Most Favoured Nation ("MFN") status, proposed new export bans on luxury goods, and raised additional tariffs on a wide-range of Russian and Belarusian products.

New Powers

The Economic Crime (Transparency and Enforcement) Act (the "ECA")¹  came into force early on 15 March 2022. That legislation introduces²  a new register of overseas entities, measures to strengthen unexplained wealth orders and reforms that likely will intensify sanctions enforcement. In a significant move, it also makes it easier and quicker for the UK Government to impose sanctions, particularly for persons already sanctioned by other countries (the US, the EU, Australia and Canada).

New UK Sanctions

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

• Alexey Mordashov (A majority shareholder in steel company Severstal)
• Andrey Melnichenko (Founder of EuroChem Group)
• Viktor Vekselberg (Owner of the 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 directors of Rusagro Group)  
• Dmitry Medvedev (Deputy chairman of the Security Council of Russia)
• Mikhail Mishustin (Prime Minister of Russia)
• Sergei Shoigu (Russian Defence Minister)
• Dmitry Peskov (Putin's press secretary and a Kremlin spokesperson)
• Maria Zakharova (Director of the Information and Press Department of the Ministry of Foreign Affairs of the Russian Federation)
• Gas Industry Insurance Company SOGAZ
• Geopolitica
• Internet Research Agency
• New Eastern Outlook
• Oriental Review
• United World International

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

• Mikhail Fridman (Founder of Alfa Bank and shareholder of LetterOne)
• Petr Aven (Previously President of Alfa Bank and co-founder of LetterOne)
• German Khan (Business partner of Aven and Fridman in both Alfa Bank and LetterOne)
• Oleg Matveychev (Russian Duma member and propagandist)
   

This brings the total number of persons designated since Russia commenced its activities in the Ukraine to more than 1,000 and follows on from significant designations made at the end of last week, including the addition (on 11 March 2022) of 386 members of the State Duma⁵ for their support of the treaties that recognised the independence of Luhansk and Donetsk, and seven individuals⁶ on 10 March 2022:

• Roman Abramovich (owner of Chelsea FC and stakeholder in steel giant Evraz and Norilsk Nickel)
• Oleg Deripaska (Stakeholder in En+ Group)
• Igor Sechin (Chief Executive of Rosneft)
• Andrey Kostin (Chairman of VTB bank)
• Alexey Miller (CEO of Gazprom)
• Nikolay Tokarev  (President of Transneft)
• Dmitri Lebedev (Chairman of the Board of Directors of Bank Rossiya)

Two Russian individuals were also added to the UK's asset freeze list on 3 March 2022:

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

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

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

Removal of MFN status and other trade barriers announced 

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

The UK has also published a list of Russian and Belarus origin products to which it will apply a 35 per cent tariff.⁸  The list covers 26 headings of products under the Harmonised System classification of goods. These products range from fish and cereals to beverages, spirits and vinegar, wood, iron and steel, cement, fertilisers, machinery, rubber tyres, railway or tramway containers and works of art. The UK claims the list applies the new tariffs to £900 million of Russian imports.  

It is unclear when these tariffs will come into force but it is likely to be within the coming days.

The UK has also announced that it will ban 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 likely to be affected luxury vehicles, high-end fashion and works of art. The UK announcement says that the export ban will come into force "shortly".⁹

Legislation Targeting Aviation 

On 9 March 2022, the UK brought in new legislation¹⁰ targeting the Russian aviation and space sector, including: 

• Aviation specific sanctions, which target aircraft in a similar way to how ships have been targeted under the shipping sanctions.¹¹  This legislation includes, amongst other provisions, a prohibition on aircraft registered in Russia or otherwise owned, chartered or operated by a designated person/entity or a person/entity "connected with Russia", from overflying or landing in the UK; and powers to detain Russian aircraft. 
• Amendments to trade restrictions to prohibit:
  • The export of aviation and space goods and technology to or for use in Russia; and
  • The provision of insurance and reinsurance for aviation and space goods/technology to a person/entity "connected with Russia" or for use in Russia.

General Licences

A number of General Licences have been issued and updated over the last week or so, including the following: 

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

On 9 March 2022, the Department of International Trade's Export Control Joint Unit (the "ECJU") issued a General Licence permitting, subject to certain exceptions, until 28 March 2022, the provision of insurance and reinsurance services relating to aviation and space goods/technology (under contracts entered into prior to 8 March 2022):

• Where the provider;¹³  
  • did not reinsure any of their obligations to provide those insurance services before 8 March 2022; or
  • reinsured any of their obligations to provide those insurance services before 8 March 2022 and no such reinsurance cover has, as a matter of applicable law, been rendered unenforceable, suspended, frustrated or prohibited by any applicable sanctions; or
  • if the insurance obligations they are reinsuring have not, as a matter of applicable law, been rendered unenforceable, suspended, frustrated or prohibited by any applicable sanctions.

Also, on 9 March 2022, OFSI issued a notice  in respect of the General Licence permitting wind-down activities relating to VTB. This clarifies that the General Licence does not contain a requirement that funds that become payable to VTB as a necessary part of a person winding down any transactions they have with VTB be paid into a frozen account.

On 4 March 2022, OFSI issued two General Licences permitting:

• A 30-day wind-down period of positions involving the following five banks: Bank Otkritie, Promsvyazbank, Bank Rossiya, Sovcombank and VEB. This allows a person to wind down any transaction to which it is a party, involving any of the aforementioned banks, any subsidiary of the aforementioned banks, or JSCB Novikombank and allows for any activity reasonably necessary to effect this.¹⁵
•  The provision of financial services to Sberbank, or its subsidiaries, for the purpose of winding down that activity. Any activity reasonably necessary to effect this can 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 licence - INT/2022/1295476; See here. 
16 General licence - INT/2022/1298776; See here.}

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