European court upholds Russia sanctions after Rosneft challenge

Europe’s highest court has upheld EU sanctions against Moscow over its interference in Ukraine in a case taken by Rosneft, the Russian state-controlled oil giant.

In a ruling on Tuesday, the European Court of Justice said sanctions imposed on Rosneft after Russia’s illegal annexation in 2014 of Crimea were “valid.”

The judgment, which asserts the ECJ’s right of jurisdiction over Europe’s common foreign and security policy, followed a challenge Rosneft took in the British courts against the EU sanctions.

In its ruling the Luxembourg-based ECJ said the objectives pursued in imposing the sanctions were sufficient “to justify certain operators being adversely affected.”

Having regard to the fact that the restrictive measures adopted by the Council in reaction to the crisis in Ukraine have become progressively more severe, interference with Rosneft’s freedom to conduct a business and its right to property cannot be considered to be disproportionate.

Kremlin-controlled Rosneft described the decision as “illegal, groundless and politicised” and said it would “continue using all available legal means” to protect its shareholders’ interests.

Russia’s largest oil producer had argued that sanctions levied against it were illegitimate as the company had not committed illegal actions in Ukraine and had no links to the invasion of the country, and that Moscow’s annexation of Crimea should have no bearing on its access to international financial markets or ability to source drilling technology.

“This decision proves that in Europe the rule of law is being substituted with the rule of politics,” the company said in a statement, adding:

The Company considers that the sanctions imposed against it by the EU states are primarily aimed at increasing risks of doing business, obstructing implementation of Rosneft’s important projects and thus creating preferences for other oil market players.

Rosneft, run by Igor Sechin, a close ally of Russian president Vladimir Putin and a former deputy chief of staff in his administration, said that the court had ignored precedents set by previous rulings that some Iranian banks should not be affected by sanctions against that country’s nuclear program.

“It’s hard to argue against the fact that, like a boomerang, sanctions hit industry and financial sector of Europe,” Rosneft said after the ruling.

Russia’s BP owns 19.75 per cent of Rosneft and 19.5 per cent is help by an international consortium that includes Swiss oil trader Glencore and Qatar’s sovereign wealth fund.

In its ruling, the ECJ said there was a “reasonable relationship” between the sanctions and the objectives underpinning them.

“In so far as that objective is, inter alia, to increase the costs to be borne by the Russian Federation for its actions to undermine Ukraine’s territorial integrity, sovereignty and independence, the approach of targeting a major player in the oil sector, which is moreover predominantly owned by the Russian State, is consistent with that objective and cannot, in any event, be considered to be manifestly inappropriate with respect to the objective pursued,” the court said.

It went to say that the fundamental rights relied on by Rosneft – which were the freedom to conduct a business and the right to property –were not absolute.

“Their exercise may be subject to restrictions justified by objectives of public interest pursued by the EU, provided that such restrictions in fact correspond to objectives of general interest and do not constitute, in relation to the aim pursued, a disproportionate and intolerable interference, impairing the very essence of the rights guaranteed.”