EU Heads Agree To 90% Russian Oil Ban, Sberbank Sanctions

Law360, London (May 31, 2022, 1:29 PM BST) -- European Union government heads said Tuesday they have agreed on new Russian sanctions that include a 90% cut in the country's oil imports by the end of the year and the expulsion of Sberbank, Russia's largest lender, from the SWIFT global financial messaging system.

Ursula von der Leyen, president of the European Commission, said in a statement that EU leaders had also agreed, at a meeting of the European Council, to completely prevent companies in the bloc from insuring or re-insuring Russian ships.

"Sberbank is the biggest Russian bank, with 37% of the Russian banking sector," von der Leyen said. "So this is good that we now de-SWIFT Sberbank."

The latest array of sanctions included plans for a complete ban on Russian oil when it was proposed this month along with the SWIFT ban for Sberbank, possibly showing that the council had pushed for the measures to be weakened while the energy crisis hangs over Europe.

The oil ban was imposed after weeks of debate over the economic backlash that would result from turning off the taps of an important EU oil source. The ban should be implemented by the end of the year. The SWIFT ban for Sberbank will also be included in the sixth sanctions package.

"This is an important step forward," von der Leyen said. "We will soon return to the issue of the remaining 10% of pipeline oil."

Sberbank said in response that the SWIFT ban does not change its situation in international settlements and does not affect its domestic finances.

"We are working as normal — the major restrictions are already in place," the bank said in a statement in Russian. "Our intra-Russian operations do not depend on SWIFT and will be carried out by the bank as standard."

The sixth EU sanctions package also shuts out Russian companies from "a whole range of business services." This measure follows an announcement at the start of the month by the U.K. government that it would completely ban Russian companies from using a large part of the country's professional services industry, including accounting, auditing and public relations.

The EU has already shut out seven Russian banks from SWIFT, acting in March to send a "very clear signal to Putin and the Kremlin." SWIFT is particularly important in Europe, by far Russia's largest trading partner, where it is the message provider for systemically important payment systems such as Euroclear PLC and Clearstream.

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, is a Belgian-based financial messaging network that allows banks to make rapid cross-border payments for financial transactions and trade financing.

Europe has moved quickly to intensify sanctions against the Kremlin since Russia invaded Ukraine in February. The bloc has proposed plans to standardize criminal law on violating sanctions in Europe so that states mete out equal punishment for breaches.

EU regulators have also introduced new guidance for companies suddenly caught holding sanctioned assets, including allowing investment funds to segregate Russian investments into "side pockets" so they can restart their business without violating sanctions.

--Additional reporting by Joel Poultney and Najiyya Budaly. Editing by Ed Harris.

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