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'Deter, Disrupt and Demonstrate' – the UK Government publishes its first sanctions strategy

Deter, Disrupt and Demonstrate' – the UK Government publishes its first sanctions strategy

    On 22 February 2024, the UK Government published its first sanctions strategy entitled 'Deter, Disrupt and Demonstrate'. The 31-page document sets out the UK Government's approach to sanctions, including the use of sanctions as a foreign policy tool in "a more dangerous and uncertain world" where "geopolitical tensions are at their most intense since the end of the Cold War". 

    For those who know about sanctions, the document is not groundbreaking, but it does offer a useful summary of the UK Government's present and future sanctions priorities.  

    Below we discuss five key themes emerging from the strategy. We focus in particular on the likely developments of UK sanctions in the months and years ahead. 

    1.  Continued focus on Russia

    Unsurprisingly, sanctions targeting Russia remain a high priority. The UK Government will continue to deploy sanctions as a means to undermine Russia's war against Ukraine and as part of its efforts to prevent circumvention of existing sanctions. The document estimates that the collective impact of sanctions has prevented some US $400 billion from being used in furtherance of Russia's war - "enough to fund the invasion for a further four years".

    In June last year, the UK Government amended its Russia sanctions regime – the Russia (Sanctions) (EU Exit) Regulations 2019 – to enable Russian sanctions to remain in place until compensation is paid to Ukraine. The UK Government is also exploring legal avenues to allow seized Russian assets to be used in support of Ukraine. Additionally, the document mentions the development of "a voluntary process whereby sanctioned individuals may apply for sanctioned funds to be released for the express purpose of supporting Ukraine's recovery and reconstruction".

    The UK Government's current focus seems to be on the more nuanced aspects of existing Russian sanctions, rather than introducing swathes of new measures. In particular, the priority will be to prevent circumvention through the targeting of supply chains, with an emphasis on military procurement networks and third countries that supply and assist Russia. This is consistent with recent statements from many of the UK's allies, including the US, the EU and other G7 countries.

    2. But, don't forget about other sanctions regimes

    Although Russia remains in the top spot, the UK has a further 36 live sanctions regimes under SAMLA. These  focus on specific countries or policy objectives. Some of these regimes are autonomous, while others are mixed or UN-only sanctions. The UK also has two further regimes under the Export Control Order 2008. A helpful infographic in Annex 1 of the strategy document provides further detail.

    The strategy document states that "sanctions are a critical instrument of the UK’s foreign, national and security policy". Recent activity under non-Russia sanctions regimes has been driven by geopolitical developments, including the crackdown on protests in Iran and activities by the Myanmar military. 

    The strategy document states that the UK Government will continue to use sanctions to address serious abuses and violations of human rights globally and to tackle serious corruption. It will also modify existing sanctions or develop new regimes to address changing contexts and priorities.

    3. Spotlight on international collaboration

    International collaboration has been a recurring item on the UK's sanctions agenda. This theme was also evident in the last two OFSI annual reports (which we reported on here and here).  As a UN Security Council permanent member, the UK acknowledges its responsibility to maintain "international peace and security" and promises to continue to initiate sanctions proposals and engage partner countries in support of this goal.

    In terms of Russia, the UK Government appears to be increasingly keen to collaborate with other G7 countries, the EU and the Five Eyes1 nations, particularly where "agreement at the UN Security Council has not been possible". 

    Under the Economic Deterrence Initiative (EDI), first introduced in March 2023 and underpinned by up to £50 million in funding, the UK Government has said it will develop "a programme of targeted technical assistance" for third countries, which will be carried out in cooperation with its EU and US partners. 

    The EDI will also support the UK's growing network of sanctions specialists in diplomatic missions to third countries to further tackle circumvention.

    In the British Overseas Territories and Crown Dependencies, future reforms are expected to tackle "the growing threat of illicit finance and corruption" and increase transparency of beneficial ownership. 

    4. Continued strengthening of implementation and enforcement

    The EDI also promises to strengthen the implementation and enforcement powers of the various sanctions departments and agencies. The initiative includes ambitious proposals to:

    • establish the Office of Trade Sanctions Implementation (OTSI) to ensure compliance with trade sanctions across industry. This was announced in December 2023 with the promise that the OTSI would launch in "early 2024". We are still awaiting the new legislation required to grant OTSI its legal powers. The strategy document states that "OTSI will be operational later in 2024";
    • enhance OFSI's capabilities to implement novel sanctions, such as the Oil Price Cap;
    • provide additional support for HMRC to "investigate and prosecute the most serious [trade] sanctions breaches" with "expanded intelligence and data functions";
    • expand the range of penalties for sanctions breaches; and
    • establish specialist teams to manage sanctions litigation.

    The report does not provide much detail on the range of sanctions penalties and enforcement strategies on the horizon. Clearly, however, the UK Government is busy giving teeth to its sanctions bodies2 and is gearing up to take enforcement action against those who breach sanctions.

    5. Avoiding unintended consequences 

    The strategy document acknowledges that sanctions regimes must be proportionate and selective, noting that sanctions are merely one of a selection of tools for furthering the UK's international objectives.  The report states that sanctions are routinely reviewed and are not "used lightly".  

    The UK Government also commits to acting effectively and responsibly by, among other things, minimising the unintended consequences of sanctions. This includes protecting humanitarian activities, avoiding imposing sanctions on basic food or medicines, and addressing the implications for businesses and for the UK and global economies. 

    To further support these commitments, a humanitarian exception will be introduced across financial sanctions, when parliamentary time allows. It is said that this will "provide assurances to particular humanitarian actors and to the financial sector that they can conduct legitimate humanitarian activity and make appropriate payments in areas where sanctioned individuals operate or administer territory". 

    This development is relevant not only to humanitarian organisations, but also to institutions and companies with clients and counterparties who deliver humanitarian aid in sanctioned territories. 

    The full strategy document can be accessed here

    To keep track of all the latest Russia sanctions developments, access our Russia Sanctions Tracker here.

    Additional author: Eleanor Zhao, Junior Associate

    1. Australia, Canada, New Zealand, the United Kingdom and the United States.

    2. For those struggling to keep up with the growing number of sanctions departments and agencies, the report includes a useful 'roles and responsibilities' table in Annex 2.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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