In typical bureaucratic fashion, the European Commission issued a document clarifying some of the provisions in the package of sanctions adopted against Russia last year. Apparently, now even firms providing financial research and investment services will find themselves sanctioned if they provide advice to sanctioned Russian companies.
The EU’s ‘FAQ’ document proved to be so procedural and obscure that Russian business newspapers only managed to dig it up today, despite the fact that it was formally issued a month ago.
The “Guidance Note on the implementation of certain provisions” of the EU’s package of sanctions adopted in the summer of 2014 features nearly four dozen questions, including one on ‘direct’ and ‘indirect’ provision of investment services to sanctioned Russian companies.
The document ‘clarifies’ that “among other things, the definition of investment services in Article 1 of Regulation 833/2014, as amended, includes ‘investment advice’. While the provision of research is formally different from the provision of advice, it constitutes by its nature a form of indirect advice. The analysis in the research document indeed helps a potential investor in taking his/her decisions. This may concern, for example, the decision as to whether to ‘hold’, ‘buy’, or ‘sell’ a particular security. In sum, the provision of financial research should be seen as a form of investment service and is thus prohibited under the Regulation.”
Therefore, financial firms providing direct or indirect advice to sanctioned Russian companies better watch out, or they may find themselves under sanction.
In July 2014, the EU adopted a package of sanctions targeting Russia’s energy, defense and banking sectors over Russia’s alleged role in the Ukrainian conflict. The sanctions were preceded by several rounds of restrictions imposed by the EU, the United States and their allies against Russian and Crimean officials Brussels believed to have played a role in ‘destabilizing’ Ukraine. EU officials have since had to clarify the contours of the increasingly complex and complicated package of sanctions, including via explanatory documents like the one cited above.