Russian troops began to amass at its western border with Ukraine in December 2021, to international concern. By 24 February 2022 Russia had launched its “special military operation” and invaded. While this move received international condemnation, it was not a surprise to the countries that had begun readying sanctions regimes at the end of 2021, as the optics on Russo-Ukraine conflict rapidly deteriorated.

Since then, there has been a mass global uplift in sanctions listings against Russia. UK Finance tracked 803 listing updates and 457 legislative or regulatory updates in 2022. To put this into context, in 2020 430 updates were tracked and in 2021 only 270. In fact, last year the total number of sanctions listings from 2021 was surpassed by mid-April, while the number of sanctions updates from 2020 was surpassed in early July, and both years were surpassed in early November. Only six out of the 25 UK sanctions regimes were not updated in 2022. However it is worth noting that an uplift in sanctions regimes was expected in the years to come, Russia’s invasion of Ukraine merely accelerated an already upward trend.

Nevertheless, unprecedented policy change and pace in the sanctions space has deployed economic statecraft in an attempt to influence and ultimately dismantle the Russian war effort. The UK in particular has leveraged its position as a centre for international finance, delegating the administration of measures to its banking and financial services industry in order to place pressure on global commerce and investment. Notably, we also saw companies ‘self-sanctioning’ as they exited their operations in Russia before any regulation stipulations.

To date, the UK has sanctioned more than 1,200 individuals and over 160 entities under the Russia Sanctions regulations. March 2022 saw an update to the primary act (Sanctions and Anti-Money Laundering Act 2018 - SAMLA) when the Economic Crime (Transparency and Enforcement) Act 2022 received royal assent. This led to the removal of section 2 of SAMLA known as “the appropriateness test”, which required a minister to determine whether sanctions where a reasonable course of action, resulting in delays in implementation in contrast to western allies. In its place, a new urgent designation procedure was introduced so that the UK could designate the individuals and entities that are designated by any of the US, EU, Australia and/ or Canada – a step forward for international alignment and the UK’s ability to expedite implementation. 

Sanctions implementation is not without its challenges though. As listings/ prohibitions are used to hold Russia’s foreign reserves, dampen its trade and cap seaborne Russian crude oil products, finance-based sanctions have encroached further into the trade space. The recent Oil Price Caps, in December and February, on the maritime transport of Russian refined oil products with price exceptions, as coordinated by the G7, the EU and Australia, is a prime example of this. Sanction regimes have made the long-held distinctions between sanctions, export controls, import restrictions and tariffs more nebulous.

The sanctions arena continues to be complex and contradictory, the challenge of reconciling and interpreting legislation with practical application remains prevalent. While the relatively straightforward sanctions listings have gone ahead, the more complex cases will dominate the year to come and critical questions remain over ownership and control (on whether the entities of a sanctioned party fall within the perimeter of restrictions).

Fighting in Ukraine remains entrenched, and a Russian offensive is expected this spring. Naturally, the UK’s autonomous sanctions regime is predicted to expand in both scope and severity. The UK has been building its capacity for sanctions enforcement.

Indeed, the Office of Financial Sanctions Implementation (OFSI) has more than doubled its staff over the past year. Finally, international alignment will be essential. While coordination emboldens sanctions, any misalignment in terms of timing, interpretation or targets fuels compliance challenges and risks for multi-national and multi-jurisdictional organisations.