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Potential Russian sanctions

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Rivlin Ken
Ken Rivlin

Partner

New York

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Townsend Matthew
Matthew Townsend

Partner

London

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Gorchakov Igor
Igor Gorchakov

Partner / Advocate

Moscow

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06 March 2014

Allen & Overy is closely monitoring developments in Ukraine and Russia. The situation continues to evolve rapidly but, as reported widely in the press, there are early indications that the EU and U.S. are contemplating diplomatic and economic sanctions.

The EU has called on Russia to recall its troops from the Crimea by Thursday 6 March or face “targeted measures.” Russia disputes the presence of its troops in Ukraine per se, so the diplomacy is by its nature fraught, with the possibility of unpredictable regulatory outcomes on both sides. The EU's 28 leaders will meet in an emergency session in Brussels on Thursday to decide on a course of action. Initially, any sanctions that the EU may implement are likely to be narrow in scope and highly targeted. These sanctions may, for example, impose travel bans on Russian officials. Further measures could include asset freezes on Russian officials, a widening of the travel ban to a broader class of Russians, or a suspension of ongoing EU-Russia talks. Some EU leaders may also push for an arms trade embargo, pursuant to which, for example, the EU would prohibit the sale of arms to Russia. While they cannot be ruled out, general trade sanctions, including restrictive measures impacting the energy sector, are unlikely given the EU’s close ties with Russia and dependence on Russian energy. Russian President Vladimir Putin has warned that sanctions could damage Europe’s interests.

U.S. Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov met bilaterally on Wednesday to discuss Ukraine, and initial reports indicate that discussions will continue in the days ahead. The Obama administration has suspended military ties to Russia, and U.S. lawmakers are considering options such as imposing sanctions on Russia’s banks, freezing the U.S. assets of Russian public institutions and private investors, and imposing travel bans. So far, U.S. officials have indicated that they would sanction individual Russians who were involved in sending troops into Crimea, but have not clearly stated whether they would seek broader sanctions on the Russian economy. U.S. support for sanctions targeting Russia is not unanimous, and certain U.S. government officials have stated that they expect U.S. sanctions targeting Russia would have little effect unless they are matched by actions from Europe.

In response, Russian lawmakers are drafting a law that would allow Russia to confiscate assets belonging to U.S. and EU companies if sanctions are imposed.

For further information, or to discuss how U.S. or EU sanctions against Russia may impact your business or transactions in which you may be involved, please contact:

For U.S./London: Ken Rivlin and Matt Townsend; For Moscow: Edwin Tham, Igor Gorchakov and Cameron Half