Industry News

EU and US Sanctions Against Russia

July 31, 2014


    On July 29, 2014, the European Council released a statement regarding stricter sanctions on Russia.  Russian financial institutions will be restricted from European Union (EU) capital markets.  The trade sanctions will also include arms, goods for the military as well as civilians, and technology for oil production. 

    The Council is taking a stand against the Russian takeover of Crimea.  The European Council’s statement declared, “illegal annexation of territory and deliberate destabilization of a neighbouring sovereign country cannot be accepted in 21st century Europe.”  Additionally, the death of nearly 300 innocent passengers heading to Malaysia on flight MH370 also fueled EU’s sanctions against Russia.  The Council stated that they have demanded that Russia find a “peaceful resolution” to the crisis in the Ukraine, yet Russia has continued to provide supplies that have sparked further chaos and death in the region.  The EU is sending the message to Russia that they will not tolerate the turmoil in the region and doing so will bring economic consequences for Russia.  In the past, Russia and the EU have had strong economic ties.  In 2013, Russia received € 100 billion ($134.38 billion) of products from the EU.

    Russia’s economy is facing other economic hurdles as the country has also been ordered to pay $50 billion to stockholders of the Yukos Oil. Co. after the “country violated the Energy Charter Treaty by destroying the oil company and appropriating its assets.”

    Earlier this year, President Barack Obama placed sanctions on Russia with a set of executive orders, which restricted “the assets of individuals or business entities” who were furthering turbulence in Ukraine.  The U.S. Department of the Treasury followed this with restrictions on citizens of Russia who were “threatening the sovereignty and territorial integrity of Ukraine.”  The EU has also placed travel constraints on a number of individuals in Russia’s military and in the government. 

    On July 29, the US Commerce Department pronounced, “BIS will institute a policy denying export, reexport or foreign transfer of certain items for use in Russia's energy sector that may be used for exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil.”  On the same day, President Obama announced, “the United States is imposing new sanctions in key sectors of the Russian economy: energy, arms, and finance.”  The sanctions will include banks and defense businesses.  The United States is also “suspending credit that encourages exports to Russia and financing for economic development projects in Russia.” 

    Furthermore, the U.S. Department of Agriculture (USDA) has stopped “provid[ing] export credit guarantees that would support sales to Russia, under GSM 102,” which “guarantee[s] loans to foreign buyers of U.S. agricultural commodities.”  Additionally, the U.S. Export-Import Bank is not providing new financing for Russia.

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