Transatlantic partners continue to ratchet pressure this week on the Kremlin responsive to the Russian Federation’s continued conflict with Ukraine. The United States announced its immediate ban on Russian oil and gas exports (and seafood and alcohol products); the United Kingdom (UK) Government stated it would phase out Russian energy by the end of the year.  The US is also moving forward with revoking Russia’s (and Belarus’) Permanent Normal Trade Relations (PNTR) status, which would allow for higher tariffs on Russian (and Belarusian) goods not currently banned by the US Government.

Meanwhile, in the European Union (EU), negotiations on the Carbon Border Adjustment Mechanism continue to advance, along with progress on the bloc’s proposal for an International Procurement Instrument.  The US and UK established a dialogue this week to further collaborate on mutual interests in the Indo-Pacific region.  The UK and Canada also affirmed increased cooperation across a number of priorities, as well as an intent to start negotiations soon for a bilateral free trade agreement.  Meanwhile, tension between the EU and UK over implementation of the Northern Ireland Protocol appears to have subsided in light of the situation in Ukraine.

In this issue, we cover:

• Ukraine and Russia and transatlantic responses;

• Other notable US, UK, and EU developments;

• A brief UK-EU trade deal update; and

• Some notable COVID-19 highlights.

Ukraine-Russia | Western Allies Coordinate Pressure on Russia

On 7 March, the Governments of the US and Republic of Korea (South Korea) announced the formal addition of South Korea to the growing global coalition of nations implementing stringent export control policies opposing Russia’s conflict with Ukraine.  On 8 March, via a new Executive Order (EO), US President Joe Biden announced the following additional US restrictions against Russia:

• the importation into the United States of the following products of Russian Federation origin: crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products; and

• new investment in the energy sector in the Russian Federation by a US person, wherever located.

A White House fact sheet related to the new EO is available here.

In alignment with the US, the UK Government announced on 8 March that it would phase out Russian oil imports by the end of the year.  The Government will work with companies through a new Taskforce on Oil to support them to as they seek to find alternative supplies before year-end.  Russian oil imports account for eight percent of total UK oil demand; while Russian natural gas makes up less than four percent of UK supply.  UK Business and Energy Secretary Kwasi Kwarteng stated,

“We have more than enough time for the market and our supply chains to adjust to these essential changes.  Businesses should use this year to ensure a smooth transition so that consumers will not be affected.”

On 11 March, the US Government announced another tranche of restrictions, via an EO, against Russia:

• the importation into the United States of the following products of Russian Federation origin: fish, seafood, and preparations thereof; alcoholic beverages; non-industrial diamonds; and any other products of Russian Federation origin as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Commerce; and

• the exportation, re-exportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of luxury goods, and any other items as may be determined by the Secretary of Commerce, in consultation with the Secretary of State and the Secretary of the Treasury, to any person located in the Russian Federation.

Also on 11 March, the US Commerce Department’s Bureau of Industry and Security imposed restrictions on the export, re-export, and transfer (in country) of luxury goods to all end users in the Russian Federation and Belarus and to certain Russian and Belarusian oligarchs and malign actors located worldwide.

A Group of Seven (G7) Leaders statement published on 11 March underlined the impact of the sanctions imposed and engaged to ‘make further efforts to reduce our reliance on Russian energy’.  Importantly, seven actions were agreed to, as follow:

1. Expressing intent to ‘to take action that will deny Russia Most-Favoured-Nation status relating to key products’ at the World Trade Organization (WTO), an action that will be followed by a joint statement with a coalition of WTO members.

   • President Biden stated his intent to work closely with the US Congress, which has legislation advancing, to deny Russia the benefits of its WTO membership and ensure that Russian imports do not receive most favored nation treatment in America.

2. Preventing Russia from obtaining financing from multilateral fora, including the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development.

3. Monitoring closely the sanctions through the dedicated G7 task force set up on 26 February.

4. Closing any potential loopholes from the economic sanctions particularly in the context of digital and crypto assets.

5. Fighting Russian-led disinformation campaigns.

6. Reaffirming readiness to impose further restrictions on exports and imports of key goods and technologies to Russia.

7. Ensuring that Russian entities directly or indirectly supporting Russia’s actions in Ukraine would not have access to new debt and equity investments and other forms of international capital.

On 8 March, the UK and the Visegrád Group^[1] (V4) issued a joint statement after a Summit, affirming support for Ukraine and condemning Russia’s conflict with Ukraine.  They also affirmed continued UK-V4 collaboration on cyber security, ‘a key priority of the Hungarian V4 Presidency and a vital area of cooperation in the current climate.’  Reducing the dependency on Russian fossil fuels was also a topic of discussion at the Summit.

This week, the UK Government announced sanctions against seven oligarchs^[2], including Roman Abramovich and Oleg Deripaska.  Abramovich, the owner of Chelsea FC, and the others, such as Igor Sechin and Deripaska, had assets frozen, a prohibition on transactions with UK individuals and businesses, and a travel ban and transport sanctions imposed.  Foreign Secretary Liz Truss said of the action,

“Today’s sanctions show once again that oligarchs and kleptocrats have no place in our economy or society.”

Meanwhile, the Economic Crime Bill enters into force this coming week, which will allow UK Government to further and faster impose sanctions on Russia.  The UK Government also sanctioned 386 members of the Duma for their support for the breakaway regions of Luhansk and Donetsk in Ukraine.  Foreign Secretary Truss also announced a new suite of aviation sanctions on 9 March.

In the EU, on 9 March, the Council endorsed a new set of sanctions targeted to Russia and Belarus.  The first package endorsed bans certain Belarusian banks from the global payment system SWIFT, namely Belagroprombank, Bank Dabrabyt, and the Development Bank of the Republic of Belarus, as well as their Belarusian subsidiaries.  The transactions with the Belarusian Central Bank, the listing of Belarus state-owned entities on EU trading venues (from 12 April 2022), the acceptance of deposits exceeding €100.000 from Belarusian nationals or residents and the provision of euro banknotes to Belarus have also been prohibited within this package of measures.  Furthermore, the prohibition to sell, supply, transfer or export maritime navigation goods and technology to Russia was also agreed to in the package.  The second package of sanctions endorsed adds 14 oligarchs and business people, as well as 146 members of the Russian Federation Council to the EU sanctions list.  Assets of these listed individuals have been frozen and a travel ban to the EU instituted.

EU Heads of State and Government met in Versailles on 10-11 March for an informal Summit to discuss the evolving situation in Ukraine.  The statement issued after the end of the meeting reiterated the EU’s readiness ‘to move quickly with further sanctions’ as the situation continues to evolve, with a new set of sanctions expected to be prepared over the weekend.  According to a statement by European Commission President Ursula von der Leyen, the new sanctions will include an export ban of any EU luxury goods and prohibit the import of key goods in the iron and steel sector.  The Versailles Declaration, further states the European Council ‘invited the Commission to submit its opinion on this application’ following Ukraine’s application to become a member of the EU.  The Versailles Declaration notes the agreement to ‘increase substantially defence expenditures, with a significant share for investment, focusing on identified strategic shortfalls’ while it also stresses the objective to accelerate ‘ongoing efforts to enhance military mobility throughout the EU.’  With respect to the energy dependency, the declaration states the goal – among others – is to reduce the reliance on fossil fuels, diversify the supplies and routes including LNG, and connect European gas and electricity networks.  It called on the Commission to implement the REPowerEU plans (see information on the publication further below) by May.

During the informal meeting of Telecommunication Ministers earlier this week, Ministers coordinated information technology (IT) and telecommunications equipment aid that will be provided to Ukraine, underlining further in a joint declaration the need to combat Russia’s disinformation campaigns.  In the aftermath of the EU sanctions endorsed on 2 March, where Russia Today’s (RT) broadcasting activities were suspended, Russia Today (France) challenged the Council bringing a case before the EU’s General Court on 8 March 2022, citing the Council’s decision as tantamount to censorship.

Meanwhile, the European Commission issued a Communication on 8 March, proposing a Joint European action, entitled REPowerEU, to ensure a more affordable, secure and sustainable energy policy in the bloc.  The Communication outlines the European Commission’s proposal to make Europe independent from Russian fossil fuels prior to 2030, by reducing more quickly its dependency on Russian gas.  REPowerEU will attempt to diversify gas supplies, speed up the rollout of renewable gases and replace gas in heating and power generation, with the aim of reducing EU demands for Russian energy by two-thirds before the end of 2022.  On the same day, a proposal for Cohesion’s Action for Refugees in Europe (CARE) was adopted, which allows EU Member States with access to emergency support to aid people fleeing from Ukraine.

UK Prime Minister Boris Johnson is set to host Nordic and Baltic leaders at a summit in London this coming week, as ‘he continues to lead the charge on ensuring no one actor or malign government can fundamentally compromise European security again.’  The leaders of the Joint Expeditionary Force (JEF), a northern European security coalition, are set to attend, which includes representatives from Denmark, Finland, Estonia, Iceland, Latvia, Lithuania, the Netherlands, Sweden and Norway.  As part of the agenda, the JEF will also discuss how to rebuild Ukraine.

On 10 March, the European Commission issued a proposal to establish a State Aid Temporary crisis framework – similar to that adopted through the COVID-19 crisis – that would support the economy, in the context of the Russian invasion of Ukraine.  Once adopted, the temporary framework will ensure there will be flexibility for Member States to provide liquidity support to affected companies, as well as aid for additional costs attributable to exceptionally high gas and electricity prices.

O 7 March, the UK, along with Canada and The Netherlands, launched the International Ukraine Support Group.  The UK Government further pledged an extra £100m in aid to Ukraine, bringing the UK’s total offer of support to the current Ukraine crisis to around £400 million.

Notable US Developments

On 7 March, Senate Foreign Relations Committee (SFRC) Chairman Robert Menendez (D-New Jersey) called on the Biden Administration “to take whatever steps it deems necessary to expedite and support the immediate transfer of fighter aircraft from NATO and Eastern European countries to the government of Ukraine.”  His request came after from Ukraine President Volodymyr Zelenskyy’s plea over the weekend to American lawmakers to help facilitate the transfer of any Soviet-era fighter jets that the Ukrainian Air Force can immediately use.  On 10 March, following the US Defense Department’s decision to reject Poland’s plans to provide MiG-29 fighter jets to Ukraine, US Senator Jim Risch (R-Idaho), SFRC Ranking Member, joined Senators Joni Ernst (R-Iowa), Mitt Romney (R-Utah), and 39 other lawmakers, in calling on President Biden to work with Poland and other NATO allies to expedite the transfer of aircraft and air defense systems, as well as additional support capabilities, to Ukraine.

On 9 March, President Biden signed a new EO on “Ensuring the Responsible Development of Digital Assets.”  In sum, the order establishes a Federal Government-wide approach on the digital assets industry, which includes cryptocurrencies, stablecoins, and central bank digital currencies.  The White House released a related fact sheet, available here.  US Secretary of Commerce Gina Raimondo said of the new order,

“As in all industries, America’s innovation is its strength.  Working together, we will work to ensure that American businesses remain globally competitive in this space through the responsible development of digital asset technologies.”

That same day, House Foreign Affairs Committee Ranking Member Michael McCaul (R-Texas) and other House Foreign Affairs Committee Republicans sent a letter to President Biden, requesting information about US engagement with allies and partners on digital assets, such as cryptocurrency, and what efforts have taken place within the Administration to ensure the Kremlin is not using digital assets to evade sanctions.

On 11 March, Senate Finance Committee (SFC) Chairman Ron Wyden (D-Oregon) outlined some tax policies he is developing to hold Russia (and Belarus) accountable for its conflict with Ukraine.  In a separate statement that day, Chairman Wyden also praised efforts to address Russia’s PNTR status, noting legislation had been introduced on 7 March in the Senate to revoke PNTR for Russia and Belarus; there is also companion legislation in the House.

Separately, on 10 March, the US Senate confirmed María Pagán to serve as Deputy US Trade Representative, based in the US’ Geneva Office.  US Trade Representative Katherine Tai welcomed the Senate approval, stating,

“María’s experience will be a major asset in Geneva as the world considers how to drive the World Trade Organization and the global trading system to better serve the needs of workers, families and open, competitive economies.”

Also on 10 March, the US Department of Labor released its monthly Consumer Price Index report, reflecting inflation increased to 7.9 percent – a 40-year high.  Increases in the pricing of gasoline, shelter, and food were the largest contributors to the overall increase.   While President Biden sought to attribute surging energy costs to Russia’s conflict with Ukraine, economists on both sides of the political spectrum claim the $1.9 trillion American Rescue Plan Act approved by Democrats last year helped fuel the overall inflation surge.

The US Department of Commerce published a Federal Register notice on 10 March soliciting public comment on key areas of interest related to the Biden-Harris Administration’s Indo-Pacific Economic Framework (IPEF).  The notice requests comments from interested parties by 11 April that will help develop the US position in the ongoing IPEF negotiations on the following topics:

• digital and emerging technologies;

• supply chain resilience;

• infrastructure, decarbonization, and clean energy; and

• tax and anti-corruption.

This coming week, Deputy US Trade Representative Sarah Bianchi will travel to Australia.  She will met with Australian Government officials and stakeholders from the business and labor community while in Sydney and Canberra.  Among other topics, IPEF and opportunities to strengthen the U.S.-Australian trade relationship are on the agenda.  She will also co-chair a meeting of the US-Australia Free Trade Agreement (FTA) Joint Committee.

Notable UK Developments

On 7 March, the UK and Canada agreed to strengthen bilateral cooperation across security, defence, trade (including supply chains), science, global travel health and climate sectors.  Security and intelligence cooperation will also be vis-à-vis the Five Eyes.  The two countries also intend to start negotiations soon on a bilateral free trade agreement, while the two countries also work together to help the UK’s accession to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

On 7-8 March, the UK and US held high-level consultations related to the Indo-Pacific region.  In a joint statement issued on 11 March, the two countries committed to coordinate implementation of the U.S. Indo-Pacific Strategy and the UK’s Indo-Pacific tilt, as set out in its Integrated Review.  This includes supporting green transitions in the Indo-Pacific, as part of the Clean Green Initiative and Build Back Better World agendas; collaborating on critical and emerging technologies; ensuring economic security; and opposing economic coercion in the region.  To further this collaboration, the US and UK agreed to establish a continuing dialogue on the Indo-Pacific.

On 8 March, 10 Downing Street announced Peter Wilson will serve as the new Principal Private Secretary to the Prime Minister, effective on 14 March.  Mr. Wilson was serving as Her Majesty’s Ambassador to Brazil, since January 2021; he replaces Martin Reynolds, who will return to the Foreign, Commonwealth & Development Office.

Marking International Women’s Day (8 March), the UK launched a new global partnership with the private sector^[3] to improve girls’ access to education and employment in developing countries.  The UK Government contributed an initial £9 million, with businesses providing £11 million.

On 10 March, Prime Minister Johnson announced a £4 billion injection into the UK’s regional shipbuilding industry to create tens of thousands of high-quality jobs.  The announcement at a Merseyside dockyard coincided with the Ministry of Defence publishing its refreshed National Shipbuilding Strategy (NSbS), which outlines how the Government will support UK shipyards across the nation to upskill workers, create high-quality jobs, drive technology development and ensure UK shipbuilding delivers on next-generation challenges.  The UK Government is seeking to create a pipeline by which 150 new commercial and naval vessels will be delivered over the next 30 years.

Notable EU Developments

This week, EU27 Ambassadors agreed on a compromise text for the Carbon Border Adjustment Mechanism proposal, a political priority for the French Presidency.  The deal is expected to be endorsed formally during the next Economic and Financial Affairs Council, set for 15 March.  The meeting is also expected to focus on the proposal for a minimum corporate tax rate, which would implement the OECD’s Pillar II deal.

Furthermore, technical discussions on the inter-institutional negotiations on the International Procurement Instrument advanced this week in anticipation of the political discussions expected on Monday, 14 March.  It remains to be seen if an agreement can be reached in principle this coming week.

This week, the European Parliament decided on the creation of three special Committees to address: (1) Pegasus spyware, (2) foreign interference, and (3) COVID-19 concerns.  The special Committees will comprise of 38 MEPs and will have a twelve-month mandate to investigate and come up with recommendations on each of these themes.  The COVID-19 special Committee will be looking into the European response to the pandemic in the areas of health, democracy and fundamental rights, economy and society, and the EU’s global relationships.

UK-EU Trade Deal Update

The UK-EU technical talks on the Northern Ireland Protocol Implementation continued this week.  A joint statement of the discussions reflected,

“Both Parties underlined their ongoing determination to ensure that outstanding issues in the context of the Protocol are addressed, and durable solutions are found as soon as possible for the benefit of people and businesses in Northern Ireland.”

In light of the evolving situation in Ukraine, and the closer EU-UK collaboration in this regard, the political discussions on this matter appears to have been prioritized lower, at least for the time being.

Meanwhile, the Council adopted its mandate this week on proposed legislation aiming to preserve the uninterrupted supply of medicinal products for human use in Northern Ireland, and to Cyprus, Ireland and Malta. Negotiations with the European Parliament is now imminent.

COVID-19 Updates

The European Council agreed to extend the Regulation establishing the EU Digital COVID Certificate until 20 June 2022, a key tool that enables free, coordinated and secure travel of citizens across Europe.  Meanwhile, Austria decided this week to suspend its controversial COVID-19 vaccine mandate, saying it is not proportional with the current health situation.

On Sunday, Pfizer CEO Albert Bourla claimed individuals will need a fourth dose of COVID-19 vaccine.  He stated on CBS,

“Many variants are coming, and Omicron was the first one that was able to evade — in a skillful way — the immune protection that we’re giving.”

It remains unclear whether the US Food & Drug Administration will consider a fourth dose of COVID-19 vaccine for healthy teens and adults in America.

ENDNOTES

[1] A cultural and political alliance of four countries:  the Czech Republic, Hungary, Poland and Slovakia, all of which are members of the EU and of NATO.

[2] UK sanctions were imposed against the following individuals:  (1) Roman Abramovich owner of Chelsea FC and who has stakes in Evraz and Norilsk Nickel; (2) Oleg Deripaska, who has a stake in En+ Group; (3) Igor Sechin, Chief Executive of Rosneft; (4) Andrey Kostin, Chairman of VTB Bank; (5) Alexei Miller, CEO of Gazprom; (6) Nikolai Tokarev, President of Transneft; and (7) Dmitri Lebedev, Chairman of the Board of Directors of Bank Rossiya.

[3] Business sector partners include Unilever, Pearson, PwC, Microsoft, Accenture, Standard Chartered, United Bank for Africa, Coursera, Vodafone, BP and Cognizant.