On July 29, the EU and United States took coordinated steps to expand sanctions targeting the Russian financial services, energy, and defense sectors, including restrictions on energy-related exports to Russia.  The EU also took steps to limit certain types of trade and investment in Crimea, while both the EU and United States identified additional parties subject to asset-freezing measures.  These new measures have broad implications for trade and investment activities in the region, and Russia is threatening to retaliate against U.S. and EU firms.

Specifically, the Council of the European Union (“EU Council”) agreed to impose a range of import and export restrictions relating to arms, dual-use goods and technologies, as well as certain equipment and technologies for the Russian oil industry that are not classified as dual-use items.  Those restrictions will apply only to new contracts and will be implemented by a Council Regulation expected to be published late in the day today.  Separately, the EU Council prohibited buying and selling certain new bonds, equity, or similar financial instruments issued by Russian state-owned banks; this prohibition is similarly expected to be published later today.

The EU Council also agreed to restrictions on new investment in infrastructure projects in Crimea and Sevastopol in the transport, telecommunications, and energy sectors and in relation to the exploitation of oil, gas and minerals.  Those new measures also prohibit the export to Crimea of key equipment for the same six sectors as well as related finance and insurance services.  They are included in Council Regulation 825/2014 and were published late in the day yesterday.

Finally, also yesterday, the EU published Council Regulation 826/2014, which designated 8 additional persons and 3 entities as subject to asset-freezing measures.  Together with the new designations published on July 25, 2014, this brings the number of designated parties to 95 persons and 23 entities.

In the United States, the Commerce Department’s Bureau of Industry and Security (“BIS”) announced a new policy of denying exports, reexports, and foreign transfers of certain items –including certain items that do not currently require a BIS license – for use in Russia’s energy sector in the exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil.

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) also added three Russian banks – Bank of Moscow, Russian Agricultural Bank, and VTB Bank OAO – to its recently announced Sectoral Sanctions Identifications List (“SSI List”), limiting certain new debt and equity transactions with these banks and entities owned 50% or more by them.  These additions to the SSI List come just one day after OFAC provided guidance on the application of the new sectoral sanctions.

Both BIS and OFAC also targeted United Shipbuilding Corporation – the largest shipbuilding company in Russia, which designs and constructs ships for the Russian Navy – for comprehensive restrictions, including full asset-blocking and restrictions on trade in U.S.-regulated items by any person (including non-U.S. persons) with that company.

Whether additional EU or U.S. sanctions will be forthcoming likely will depend on how events unfold on the ground in eastern Ukraine.  Notably, U.S. Treasury Secretary Jacob Lew issued a statement on July 29 in which he indicated that the United States is “prepared to take additional actions if Russia does not take steps to resolve” the Ukraine crisis.

The new EU and U.S. measures have not gone unanswered by Russia.  Press reports indicate that Russian lawmakers, in apparent retaliation against the new EU and U.S. sanctions, have taken steps to bar imports of certain European goods and are considering submitting a bill to the Duma that would further target U.S. and European companies with investments in Russia.  Specifically, Russian lawmakers have already reportedly banned most fruit and vegetable imports from Poland and have threatened to extend that ban to other European countries.  Press reports also indicate that lawmakers have proposed to bar U.S. accounting and consulting firms from doing business in Russia and to restrict imports of chicken from the United States.