Ban on foreign ERP in Russia: Second Wave of Sanctions

On 18 December 2023, the EU published its 12^th package of sanctions, which prohibited the sale, supply, transfer, export, or provision of software for the management of enterprises and software for industrial design and manufacture used in different areas.

Оn 12 June 2024, the US Treasury issued similar determination that restricts the provision of certain IT and software-related services to Russia, namely:

1) information technology (IT) consultancy and design services;

2) IT support services and cloud-based services for the following categories of software: enterprise management software and design and manufacturing software (collectively - “Covered Software”).

As a result, the exportation/re-exportation, sale/supply, directly/indirectly, from the USA, or by US persons (wherever located), of IT consultancy and design services, or of IT support services, or cloud-based services for Covered Software to any person located in the Russian Federation, is prohibited.

This determination excludes any service:

1) to an entity located in the Russian Federation that is owned or controlled, directly/indirectly, by a US person;

2) connected with the wind down or divestiture of an entity located in the Russian Federation that is not owned/controlled, directly/indirectly, by a Russian person;

3) for software that would be eligible for a license exception or otherwise authorized for export or re-export to Russia by the US Department of Commerce.  

This determination of above-mentioned US sanctions shall take effect on 12 September 2024. The EU prohibitions apply from 20 June 2024 (however, according to the 14^th sanctions package this deadline was postponed to September 30, 2024). However, there is an exception for German companies: they are allowed to continue providing business software to Russian users that are under the control of European companies or companies from partner countries listed in the EU Regulation until 31 March 2025, subject to certain conditions.

Therefore, companies should be thinking already about migration to Russian software.

SCHNEIDER GROUP can help analyze your corporate structure in order to make the proper decision on the necessity to change your current ERP system.

In case your company has to do either an SAP carve-out or migration from ERP systems to 1C products (1C:ERP, 1C:Complex Automation, 1C:Accounting), we can support you with project implementation and post-go-live support and ensure that the accounting system complies simultaneously with Russian legislation and international corporate standards. Over recent years our IT and financial specialists have supported many client projects on migration to Russian software and its further individual customization to the needs of specific companies in various sectors of the economy.

A migration consists of the following steps:

In case the migration is to be done in a short time, we can also offer an option to set-up an MVP (Minimal Viable Product) – 1C with base settings needed for operational activity. This solution enables the quick transfer of open balances, but user’ trainings and additional settings will be provided on later stages.