Client Alert 27 Feb. 2024

UK Adopts New Rounds of Sanctions Against Russia, Updates Trade Restrictions and Modifies Oil Price Cap

Click here to download the full alert with footnotes.

On February 21 and 22 the UK adopted new rounds of sanctions to mark the second year anniversary of the full-scale military conflict, and in light of the death of Alexei Navalny. In addition, during February, the UK implemented important modifications to the oil price cap in coordination with G-7 countries.

  • Designations

On February 21 2024, the UK sanctioned six individuals heading up the penal colony where Alexei Navalny, a Russian opposition figure, was kept in solitary confinement until his death. The individuals were sanctioned under the UK’s Global Human Rights Sanctions Regulations for their responsibility for activity that violates the right not to be subjected to cruel, inhuman or degrading treatment or punishment and the right to life.

On February 22 2024 the UK announced 50 new designations targeting individuals and business to mark 2 years since the full-scale military conflict. The designations target munitions manufacturers, electronics companies, and diamond and oil traders. These include Sverdlov State Owned Enterprise, the largest enterprise in the Russian ammunition industry. The sanctions also target Paramount Energy & Commodities SA a UAE-based entity facilitating trade of Russian oil, and marine entities transporting energy products such as Fractal Marine DMCC, Beks Ship Management, and Active Shipping.

On February 22 2024 the UK also updated the Common High Priority Items list composed of items critical to Russian weapons systems and its military development. All the items are subject to trade restrictions and fall under the following categories:

  • Tier 1: Integrated circuits (also referred to as microelectronics)
  • Tier 2: Electronics components including communications modules and passive electronic components
  • Tier 3A: Further electronic components used in Russian weapons systems, with a broader range of suppliers
  • Tier 3B: Mechanical and other components utilised in Russian weapons systems
  • Tier 4A: Manufacturing, production and quality testing equipment of electric components, circuit boards and modules
  • Tier 4B: Computer Numerically Controlled (CNC) machine tools and components

Companies are required to heighten their due diligence for transacting with these items.

  • Oil Price Cap

On February 1 2024, the UK adopted a new industry guidance on UK Maritime Services Ban and Oil Price Cap. The guidance was adopted in parallel with the G-7 Price Cap coalition compliance and enforcement alert.

On February 16, 2024, OFSI adopted General licence - INT/2024/4423849, under Regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 concerning the oil price cap. This replaced the previous General Licence Oil Price Cap INT/2022/2469656, which expired on 18 February 2024. This General Licence permits the supply or delivery by ship of Russian crude oil and oil products, as well as provision of associated services, so long as the price paid for Russian oil or oil products is at or below the price cap. This General Licence sets the price at USD $60 per barrel for crude oil, USD $100 for “premium to crude”, and USD $45 for “discount to crude”.

On February 16, 2024, the G-7 price cap coalition published an update on the application of the price cap rules which took effect on February 19, 2024 in the UK. The key changes include (i) per-voyage price cap attestation (rather than on an annual basis) and (ii) an itemized price information for ancillary costs (requirement that itemized price information is provided upon request within 30 days to those who do not have access to price information, including shipowners and insurers.

On February 24, 2024, the G-7 including UK issued a joint statement where it was signalled that the allies will take a coordinated approach in tightening compliance and enforcement of the oil price cap.

  • New Sanctions Strategy

The UK has launched its first sanctions strategy which sets out (1) how the sanctions regime address threats and malign activity; (2) how international coalitions and coordinated actions maximizes impact of sanctions: (3) how to reinforce sanctions implementation and enforcement by UK businesses; and (4) how the UK is currently minimizing unintended consequences from sanctions.

  • Reporting Requirements

In June 2023, the UK government announced that it would be introducing two new reporting measures. These measures came into force in December 2023, through the Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2023.

  • Immobilised Assets reporting measure: Relevant firms are now required to inform OFSI of any funds or economic resources they hold for the Central Bank of Russia (CBR), Russian Ministry of Finance (MOF) or Russian National Wealth Fund (NWF). This includes a person owned or controlled directly or indirectly by these entities, or a person acting on behalf of or at the direction of these entities. This new reporting obligation is intended to provide the government with a more comprehensive picture of the value and nature of CBR, MOF and NWF assets held in the UK.
  • Designated Persons asset reporting measure: This new requirement means Persons designated under the Russia financial sanctions regime are required to proactively provide details of their UK assets to OFSI (or their worldwide assets if they are UK persons). The government intends for this measure to be extended to the Belarus regime in early 2024. Failure to report assets is an offence subject to a civil monetary penalty. This is regardless of whether the designated person had a reasonable excuse for failing to report.

Curtis is closely monitoring any legislative development. Curtis is committed to provide the best advice to its clients on how to navigate the complex regulatory environment.

About Curtis

Curtis, Mallet-Prevost, Colt & Mosle LLP is a leading international law firm. Headquartered in New York, Curtis has 19 offices in the United States, Latin America, Europe, the Middle East and Asia. Curtis represents a wide range of clients, including multinational corporations and financial institutions, governments and state-owned companies, money managers, sovereign wealth funds, family-owned businesses, individuals and entrepreneurs.

For more information about Curtis, please visit www.curtis.com.

Attorney advertising. The material contained in this Client Alert is only a general review of the subjects covered and does not constitute legal advice. No legal or business decision should be based on its contents.

Please feel free to contact any of the persons listed if you have any questions on this important development.

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