The drastic course of events last week, with Russia's invasion of Ukraine, have led to strong reactions from around the world. The EU, USA and UK have all introduced extensive new sanctions against Russia in several stages. This article summarises the main elements in the sanctions introduced thus far, with the focus on the EU's sanctions, as well as what businesses with links to Russia through, for example, Russian suppliers, customers or operations in the country, need to think about as a result of the current situation.
Note that in view of the current situation, updates and additions to sanctions that have been put into place so far are being made on a continuous basis. The text below is up to date as of 11 March.
What new sanctions have been imposed?
The sanctions partly entail an expansion of those sanctions that were already in place before Russia's invasion, and partly the imposition of completely new sanctions.
So far, the EU has introduced new sanctions against Russia in five rounds, through decisions on 23, 25 and 28 February, as well as on 1 and 9 March. The package of sanctions is extensive, but can basically be summarised as follows:
- A large number of individuals and entities have been placed on the sanctions list, including President Vladimir Putin, with the implication that their assets are frozen, that no funds may be made available to the listed persons/entities, as well as a ban on listed persons entering the EU. The list is being updated continuously with additional individuals and entities.
- Introduction of more restrictions on the parts of the Donetsk and Luhansk Oblast regions that are not controlled by the Ukrainian government, including import and export bans on goods, technology and services within the areas of transport, telecommunications, energy or exploration for oil, gas and minerals.
- Targeted sanctions against the financial sector, including a ban on accepting deposits in excess of EUR 100,000 from Russian physical or legal entities, prohibitions on transactions relating to the management of reserves and assets of the Central Bank of Russia, a ban on investing in projects co-financed by the Russian Direct Investment Fund, as well as prohibition on selling, supplying, transferring or exporting banknotes issued in euros to Russia. Seven banks are also excluded from the SWIFT financial messaging service as of 12 March 2022.
- Sanctions targeted at the energy and transport sector (including shipping), as well as increased restrictions on exports of dual-use products and restrictions on exports of goods and services that can be used by the Russian military.
The EU has also imposed new sanctions on Belarus in the form of trade restrictions on goods used for the production or manufacture of tobacco products, mineral products, potash products, wood products, cement products, iron and steel products and rubber goods. In addition, a ban on exports of dual-use goods and technologies to Belarus or for use in Belarus, as well as on the export of goods and technologies that may contribute to Belarus' military, technical, defence- and security-related development, as well as on the export of certain machines.
The US and UK have added a large number of Russian individuals and legal entities to the sanctions lists and, like the EU, have imposed extensive sanctions on the financial sector. In addition, the US has introduced export bans on certain technology products manufactured in the US, as well as import and export bans targeting the regions of Donetsk and Luhansk.
WHAT DOES THIS MEAN FOR MY BUSINESS?
Anyone who has operations related to Russia, whether through Russian suppliers and customers or through having operations in Russia, needs to familiarise themselves with and analyse the applicability of the new sanctions. Ensuring compliance with all applicable sanctions is of great importance. There can be major consequences if the sanctions are breached, both economically and commercially as well as for individuals.
Below, we have listed a few things to keep in mind in the current situation:
✓ Check your business for links to Russia and make sure that you are aware of all of them. Make a risk map and conduct a contingency analysis.
✓ Familiarise yourself with the new sanctions package and evaluate the extent to which they can be applicable. This includes keeping regularly up to date regarding which people and entities are on sanctions lists and ensuring that you are fully aware of who you are doing business with and the underlying ownership structure.
✓ Even though export restrictions are targeted at specific sectors, a large number of products and services are included. So ensure that any exports are not subject to restrictions by knowing what is being exported and familiarising yourself with the restrictions that are in place.
✓ Terminate any contractual relationships with parties that are sanctioned. Avoid new contractual relationships with Russian people or entities. This is especially important at present when the scope of additional sanctions is uncertain. In general, new contractual relationships that might have a link to Russia or Belarus also need to be preceded by a review of sanctions.
✓ Review any existing agreements with Russian counterparts that are not subject to sanctions. Questions to consider include the extent to which it is possible to maintain the agreement (e.g. whether payment flows will be possible) and whether force majeure should be declared.
If you have any questions or concerns surrounding the sanctions and their impact on your business, you are very welcome to contact us.