The U.K. Sanctions against Russia – Are These Sanctions with Teeth?

The U.K. Government has “toughened and expanded” its sanctions against Russia.

The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022 were laid before Parliament at 4 p.m. on 10 February 2022 and came into force at 5 p.m. on the same day.

The Regulations do not mean that sanctions kick in automatically in the event of a Russian invasion of Ukraine, but they give ministers the powers to impose them.

The sanctions strengthen the U.K. Government’s powers and widen the scope of who can be targeted in response to any further Russian “aggression.”

Sanctions are an important tool for a country’s national security. They can be used to change and constrain behaviour and by limiting access to resources it enables a country to counter threats to international peace and security.

The Regulations make two key points:

First the regulations allow ministers to punish Russian businesses and individuals in several sectors, in the event Russia invades Ukraine. The industries covered are chemicals, construction, defence, electronics, energy, financial services, mining, transport, communications and digital. The scope of industries reflects the wide range of sectors being targeted by the U.K. Government.

The sweeping new sanctions allow ministers to target not only those linked directly to the destabilization of Ukraine, but Government of Russia-affiliated entities and businesses of economic and strategic significance to the Russian government, as well as their owners, directors and trustees. This is a clear indication that the regulations may also apply to Russian individuals residing in the U.K. and therefore represent the strongest sanctions regime introduced by the U.K. against Russia.

The sanctions are clearly tough, but the question is whether the U.K. will target the personal wealth belonging to Russian individuals with these sanctions. Liz Truss has openly said that the new sanctions would allow the U.K. to “act swiftly in lockstep with the U.S. and other allies to freeze assets and ban travel.” The government could freeze assets, or a more immediate effective strategy would be to strip targeted individuals of their visas. The Government has many other legal tools in place. In 2018 the government introduced Unexplained Wealth Orders which compels an individual to reveal the source of their wealth and, in the event of an inadequate explanation or unsatisfactory evidence, it allows for the confiscation of assets.

In the past, critics have accused the U.K. Government of passing sanctions symbolically and for adopting a hands-off approach. However, the present situation is unique with many predicting that Russia is on the brink of invading Ukraine. There are 130,000 Russian troops surrounding Ukraine on three sides and a real fear that “we are closer [to war] than we’ve been on this continent for 70 years” (James Heappey). This would trigger one of the most dangerous national security crises since the Cold War, and therefore the U.K. Government has no other alternative but to put some sharp teeth behind these sanctions.

Given the situation companies with exposure to Russia and the key sectors are advised to consider the impact of these developments on their organization.

For assistance, please contact Partner Sarnjit Lal at our London office or your regular AT lawyer.