EU and US implement new sanctions on Russia despite Ukraine ceasefire

By bne IntelliNews September 12, 2014

Ben Aris in Vienna -


The EU and US implemented new sanctions on Russia on September 12, despite  general agreement that a ceasefire between the Ukrainian government forces and pro-Russian separatists is holding.

The US raised the stakes by adding  Gazprom, Europe’s leading gas supplier, to its sanction list,  a name conspicuously missing from the EU's list. Both the US and EU targetted banks, energy and defence companies, adding new names and tightening existing restrictions to prevent  listed banks and companies from issuing bonds and shares in international capital markets with maturities longer than 30 days.

However, the EU also offered a carrot along with a stick, saying that if peace came to eastern Ukrainian, sanctions could be undone as early as the end of this month.

Moscow has warned it  will respond with its own counter sanctions, which may cap imports of certain western automobiles and clothing. Prime Minister Dmitry Medvedev said the government had also discussed banning EU airlines from Siberian airspace and requiring them to circumvent the country on their Asian routes.

The EU voted for a new sanctions list on September 5, however it held off implementing them to see how the situation developed on the ground in Ukraine. On September 12 it  confirmed that new sanctions against Russia would restrict  loans to three defence companies - Uralvagonzavod, Oboronprom, and United Aircraft Corporation - and three energy companies - Rosneft, Gazprom Neft and Transneft - and it put sanctions  on services for deep drilling at oil deposits, including offshore. 

There is also a new list of 24 people who will be personally sanctioned, many of them in the military fighting in Ukraine as well as several Russian decision-makers and oligarchs.  Sergei Chemezov, head of  Rostec, a state holding company for  defence and technology companies, is the most well known new name.  Mr Chemezov has been on a US sanctions list since April.

The EU also imposed  restrictions against Alexander Zakharchenko, currently the top-ranking rebel leader in Donetsk, who represented the separatists during last week’s ceasefire negotiations, and Vladimir Zhirinovsky,  head of Russia’s far-right Liberal Democratic Party of Russia.

As well as Gazprom, the US added restrictions to Lukoil, the privately owned oil group, and Sberbank, Russia’s largest bank. The banks will be banned  from securing dollar-denominated debt of maturities of 30 days or more,  compared to 90 days under previous sanctions,  and US citizens will be prohibited from dealing in new equity offerings. The US Treasury has also imposed sanctions on Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft that prohibit the export of goods, services and technology supporting Russian deepwater, Arctic offshore and shale projects.

Several unnamed EU members were blamed for delaying the implementation of the sanctions earlier this week. Russia has successfully managed to divide Europeans on the question of sanctions as many countries in the EU have important business ties to Russia. Those are suspected to include Slovakia and Hungary. Some in the EU have expressed fears that if the sanctions are imposed now despite the improving chances for peace in eastern Ukraine, then Russia might be provoked to break the ceasefire and take full control of the regions in east being fought over.

As it is, both sides are having trouble controlling their own militias that they had been using in the proxy war. Ukraine's Ministry of Foreign Affairs reported on September 11 that there have been more than 129 violations of the ceasefire since the Minsk protocol was signed September 5, although it gave no specifics.

The sanctions take effect as the Russian economy has slowed to a crawl and fixed investment in particular has stalled. The state has already been forced to bail out large state banks – VTB Group and the Russian Agricultural Bank – while many more smaller private banks are close to the  minimum capital adequacy ratios. In addition, a large funding gap has opened up between the deposits that banks are collecting and the credits they are extending, which is being filled by the Central Bank of Russia; the CBR has now extended some RUB7 trillion in funding to Russian banks – as much as it extended during the worst days of the 2008/2009 crisis. Russia has enough in hard currency reserves to keep this up for a while, but it cannot last forever.













Related Articles

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

EU, US partly suspend Belarus sanctions for four months

bne IntelliNews - The Council of the European Union (EU) has suspended for four months the asset ... more

bne:Chart - CEE/CIS countries perform particularly well in World Bank's "Doing Business 2016" survey

Henry Kirby in London - Central and Eastern Europe and the Commonwealth of Independent States’ (CEE/CIS) countries performed particularly well in the World ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.