New Sanctions Imposed on Russia Following the Annexation of Four Ukrainian Regions
Following a referenda, Russian President Vladmir Putin signed treaties to annex Donetsk, Luhansk, Kherson and Zaporizhzhia in Ukraine. The result of the referenda states that majority of Ukrainians in those regions are in support of joining Russia. Although President Vladmir Putin defended the validity of the referenda, Ukrainian and Western government have described it as illegitimate. As a result, multiple sanctions have been brought against Russia.
What are the sanctions?
In September 2022, the United Kingdom, European Union and the United States announced sanctions targeting various Russian industries, entities and individuals.
United Kingdom
Building on previous sanctions, the UK government announced that it will prevent Russian access to IT consultancy services, architectural services, engineering services, advertising services, transactional legal advisory services and auditing services. In addition, the UK plans to ban exports of almost 700 British goods that are critical for production in Russia’s manufacturing sector. The UK will ‘suspend the process by which actions taken to manage the orderly failure of Russian banks are recognised under the laws of the United Kingdom, in cases where the bank is a sanctioned entity.’ The UK also sanctioned Elvira Nabiullina, the Governor of the Central Bank of the Russian Federation.
European Union
The EU introduced a price cap on maritime transport and services related to the maritime transport of Russian oil to third countries. The EU also extended import ban on certain products originated or exported from Russia. These products include steel product, wood pulp and paper, cigarettes, plastics and cosmetics as well as elements used in the jewellery industry such as stones and precious metals. The export of additional goods used in the aviation sector will be restricted.
The sanctions also includes an extension of the list of restricted items which may contribute to Russia's military enhancement. In addition, certain individuals that played a role in the referenda will be sanctioned. EU nationals are banned from holding any posts on the governing bodies of certain Russian state-owned entities. Similar to the UK, there is a prohibition ‘to provide architectural and engineering services as well as IT consultancy services and legal advisory services to Russia.’ There is also a full ban on the provision of crypto-asset wallets to Russian residents.
United States
The Office of Foreign Assets Control (OFAC) added ‘14 persons in Russia’s military-industrial complex, including two international suppliers, three key leaders of Russia’s financial infrastructure, immediate family members of some of senior Russian officials, and 278 members of Russia’s legislature for enabling Russia’s referenda and attempt to annex sovereign Ukrainian territory.’ The State Department imposed visa restrictions on 910 people and designated Russian nationals Ochur-Suge Mongush, Olga Sergeevna Sobyanina and Anna Sergeevna Ershova. The Bureau of Industry and Security (BIS) added 57 entities located in Russia and Crimea to the Entity List for ‘undertaking activities contrary to US national security and foreign policy interests.’
How will these sanctions impact Russia?
Some of these proposed sanctions may have detrimental effects on Russia’s economy. For instance, the European Council stated that the price cap will reduce the revenue Russia earns from oil. According to the European Commission, the sanctions may also damage Russia’s ability to manufacture new weapons and repair existing ones. Since majority of legal services are imported from Western countries, the UK government stated that the ban on the provision of these services will hamper Russia’s businesses ability to operate internationally.
The ban on IT consultancy services is stated to erode ‘Russia’s ability to maintain technological development with the rest of the world.’ In addition, the ban on auditing and advertising services will make it harder for Russian businesses to keep pace in the international markets. The restriction of engineering services will weaken the growth of Russia’s key industries. Furthermore, Russia’s inability to access exports from certain Western countries will hinder its capacity to manufacture certain products. In fact, reports from Ukrainians stated that they found Russian military equipment filled with semiconductors that were taken out of dishwaters and refrigerators.
It is not clear whether the proposed sanctions will stop the war as previous sanctions have failed to do so. However, Western governments are hoping that the new sanctions will at least reduce Russia’s ability to finance the war.
by Ifeoluwa Bayo-Oluyamo