New EU sanctions to stop fundraising by 3 Russian oil giants

8/9/2014

By Stephen Fidler and Laurence Norman

New European Union sanctions on Russia will expand the number of Russian companies unable to raise money in the bloc's capital markets to include three state-owned oil companies, according to documents seen by The Wall Street Journal.

The documents show the EU seeking to hit Russian oil companies, but leaving unscathed those involved in gas production and export, which are critical to many European countries' energy supplies.

Monday morning, the EU launched the final process to adopt the sanctions, three diplomats said, putting the bloc on track to implement the measures on Tuesday. Member states now have until mid-afternoon Brussels time to raise last minute objections to the package of measures. It's very rare for one of the EU governments to do so.

Under a modest expansion of sanctions introduced in late July, the three oil companies— Gazpromneft, the oil-production and refining subsidiary of OAO Gazprom, oil transportation company Transneft and oil giant Rosneft—will be forbidden from raising funds of longer than 30 days' maturity.

Five state-controlled banks, including Sberbank and VTB Bank, already barred from raising funds for longer than 90 days under the July sanctions, will also have the maximum maturity cut to 30 days. The new sanctions are expected to be implemented on Tuesday.

They include for the first time a measure preventing the named companies from raising new bank loans in the EU of longer than 30 days' maturity.

Three companies involved in military production—Oboronprom, United Aircraft Corp. and Uralvagonzavod—will be barred from future EU fundraising. The sanctions will also bar new contracts for services needed for oil exploration and production in deep water, the Arctic or shale-oil projects. European leaders said last week the measures could be lifted if there is evidence Moscow is helping forge a genuine political solution.

The restrictions will bar sales from the EU of so-called dual-use technologies—meaning they have both civil and military applications—to nine Russian companies providing services to the Russian military. The list includes electronic-optics company JSC Sirius, mechanical engineering company OJSC Stankoinstrument, and the small-arms manufacturer JSC Kalashnikov.

According to an EU spokeswoman, that evidence would need to include permanent monitoring of the Russia-Ukrainian border, the withdrawal of illegal armed groups from Ukraine and of Russian forces illegally operating on Ukrainian territory.

On Sunday, fighting in two Ukrainian cities called into question a cease-fire agreed to on Friday.They also make some exceptions for exports destined for the Russian space and civilian nuclear industries.

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