US, Europe Impose Sanctions Vs Russians, Others After Crimea "Referendum"

Tom Burroughes

18 March 2014

In a move likely to be closely watched by the banking industry, the US and European Union have punished senior Russian government officials, and other named individuals, for deploying military forces to the Crimea region of Ukraine. The move follows the referendum held in Crimea at the weekend in which the vast majority of voters chose to merge the region with Russia.

US president Barack Obama yesterday issued a new executive order, updating an order he signed a fortnight earlier, authorising the US Treasury to impose sanctions on officials of the Russian government, any person or entity operating in the Russian arms industry, and persons/entities acting for a senior Russian government official.

At the EU, meanwhile, the Council also adopted measures against 21 persons it said are responsible for undermining or threatening Ukrainian sovereignty and independence. The sanctions came into immediate effect.

“We have fashioned these sanctions to impose costs on named individuals who wield influence in the Russian government and those responsible for the deteriorating situation in Ukraine. We stand ready to use these authorities in a direct and targeted fashion as events warrant,” a statement from Obama said.

The statement from the White House did not specify exactly what these “sanctions” would be, such as travel bans and asset freezes, although a Reuters report, for example, said that the sanctions do involve bans on travel into the US of the named persons, as well asset freezes. (To view recent comments from Citigroup on the matter, for example, see here.)

The executive order named seven Russian government officials who are being designated for sanctions: Vladislav Surkov, Sergey Glazyev, Leonid Slutsky, Andrei Klishas, Valentina Matviyenko, Dmitry Rogozin, and Yelena Mizulina.

The US government also has sanctions against Crimea-based separatist leaders Sergey Aksyonov and Vladimir Konstantinov; former Ukrainian presidential chief of staff Viktor Medvedchuk; and former President of Ukraine Viktor Yanukovych.

“Today’s actions also serve as notice to Russia that unless it abides by its international obligations and returns its military forces to their original bases and respects Ukraine’s sovereignty and territorial integrity, the United States is prepared to take additional steps to impose further political and economic costs,” the statement from Obama’s office said.

European response

“In light of the developments of last week, and in the absence of any such results, the Council has decided to introduce additional measures, including travel restrictions and an asset freeze against persons responsible for actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine, including actions on the future status of any part of the territory which are contrary to the Ukrainian Constitution, and persons, and entities associated with them,” the Council said in a statement yesterday.

The Council said it “strongly condemns the holding of an illegal referendum in Crimea on joining the Russian Federation on 16 March, in clear breach of the Ukrainian Constitution. The EU does not recognise the illegal `referendum’ and its outcome. It also takes note of the draft opinion of the Venice Commission on this `referendum’. It was held in the visible presence of armed soldiers under conditions of intimidation of civic activists and journalists, blacking out of Ukrainian television channels and obstruction of civilian traffic in and out of Crimea”.

“Furthermore, there have been clear signs of increasing Russian military build-up in Crimea as well as denial of access to the peninsula to UN and OSCE representatives and missions invited by the government of Ukraine. The EU deplores these further negative developments, which are in clear violation of Ukraine's sovereignty and territorial integrity,” it said.

(Editor's note: Clearly this is a fast-moving situation, but already, an issue that raises its head is whether any of the persons named, or who might be named, have bank accounts with the kind of institutions that we regularly cover. Russians are and have been important clients for banks; in a world where there is a lot of noise about know-your-client checks and so forth, firms will need to be extra-vigilant that they don't fall foul of sanctions, as has happened in the past, for example, over Iran. This publication aims to keep a close look on this matter in coming weeks, and we invite readers to get in touch if you have concerns and comments.)