On 10 February 2022, the UK Government published amendments to its Russian sanctions programme, enabling it to designate a wide variety of parties “involved in […] obtaining a benefit from or supporting the Government of Russia“. No new designations have been made at this time, but the UK Government has previously indicated that the powers are intended to be used in response to any Russian incursion into Ukraine. The amendment came into force at 5pm UK time on 10 February 2022.
The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022 amend the Russia (Sanctions) (EU Exit) Regulations 2019 to expand the UK Government’s criteria for designating individuals and entities. Prior to the amendments, only those deemed to be “involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine” could be designated.
The new criterion allows individuals and entities who are or who have been involved in “obtaining a benefit from or supporting the Government of Russia” to be designated. This is defined broadly, and includes the following:
- Russian Government-affiliated entities (which include businesses in which the Russian Government has a majority or minority ownership stake, or which have received funding from certain Russian Government entities);
- businesses of economic significance to the Russian Government;
- businesses in a sector of strategic significance to the Russian Government; and
- businesses or other persons that own or control, or act as a director, trustee or equivalent of, a Russian Government-affiliated entity.
The list of strategic sectors is broad, and includes the following sectors in Russia:
- chemicals;
- construction;
- defence;
- electronics;
- energy;
- extractives;
- financial services;
- information, communications and digital technologies; and
- transport.
The list above includes certain sectors (such as defence, energy and financial services) that have been targeted to date under existing sanctions, but also other sectors in which UK sanctions have had limited impact so far.
It is important to note that the fact that a business operates in one of the above sectors in Russia does not necessarily mean that it will be designated; the new legislation simply provides the UK Government with the power to make designations. However, businesses subject to UK sanctions jurisdiction should carefully consider their exposure to potential sectors and counterparties that may fall within scope of the new designation criteria, and consider what safeguards can be put in place in the event of sanctions being imposed.
