Sanctions on Russia. Practical implications for foreign businesses in Russia

17/03/2022
Sanctions on Russia. Practical implications for foreign businesses in Russia

Please find below the overview of the major sanctions imposed on Russia with our recommendations on risk mitigation. Stay updated at our Telegram channel.

SWIFT cut off

SWIFT will be cut off for 7 Russian banks on 12.03.2022

  1. Bank Otkritie
  2. Novikombank
  3. Promsvyazbank
  4. Bank Rossiya
  5. Sovcombank
  6. VNESHECONOMBANK (VEB)
  7. VTB BANK

Other Russian banks and international banks operating in Russia are not affected. How foreign companies in Russia are affected: international payment operations of foreign companies that have accounts in the sanctioned banks either will be impossible starting 12.03.2022, or will be significantly delayed and have additional commissions.

It is recommended:

  • to open additional bank accounts in non-affected banks, preferably Russian subsidiaries of international banks
  • to use financial agent services to facilitate international payments

International payment from Germany to Russia with and without SWIFT

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Financial sanctions

The key Russian state-owned banks are denied access to European and US capital markets: they cannot receive long-term loans from them. Correspondent bank accounts of Sberbank in US banks will be closed. International payments of Sberbank that are handled via US banks are now blocked. European banks will not provide investment and listing services for Russian state-owned defense companies.

How foreign companies are affected: the restrictions affect the US and EU financial markets and are not relevant for regular foreign businesses operating in Russia.

Sanctions in energy sector

EU companies are not allowed to transfer any oil refining technology / product to any Russian company or for use in Russia, whether or not originating in EU.

How foreign companies in Russia are affected: EU business can fully lose the Russian oil refining market.

How we can help:
In case your local business entity in Russia is supplying oil refining technology / products to Russian customers, we can arrange its transfer to the “sleeping companies” model or complete the liquidation procedure if you decide to exit the market.

Sanctions in transport sector and airspace restrictions

EU companies are not allowed to transfer any technology / products for usage in aviation or space industry to Russia or for use in Russia, neither to sell aircrafts, spare parts to them and other equipment to Russian airlines.

EU and since March, 1st US and Canadian airspace is closed to Russian flights, key EU airlines are prohibited to use Russian airspace as a countermeasure.

How foreign companies in Russia are affected: the aviation restrictions will affect especially foreign leasing companies, as more than half of the commercial aircraft based in Russia are leased. Foreign employees based in Russia may have difficulties to travel for business purposes, if their presence is required for any registration purposes (receipt of work permits, notary visits, etc.). Ticket prices for alternative routes from Russia to Europe will increase.

It is recommended:
  • to use and monitor available alternative routes (transit flights via Baku, Istanbul, Abu-Dabi, car / train to Helsinki, Minsk, Vilnius, etc.)
  • to appoint temporary (interim) personnel as General Director, CFO, Chief Accountant, etc.
  • to switch to online operations when possible, using outsourced personnel in Russia

Countries that have closed their airspace for Russia

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How to get to Berlin from Moscow. Alternative routes

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Sanctions in technology sector

Russia will be restricted from importing certain types of dual-use technology.

How foreign companies in Russia are affected:

foreign companies are not allowed to transfer high-tech products, such as semiconductors, telecommunication equipment, encryption, laser, sensor, navigation, avionics and maritime technologies.

How we can help:

In case your local business entity in Russia is supplying high-tech products to Russian customers, we can arrange its transfer to the “sleeping companies” model, complete the liquidation procedure if you decide to exit the market or transfer your business to another CIS country.

Russian counter-sanctions

80% of export currency earnings shall be converted into Rubles. Central Bank of Russia introduced temporary ban for brokers on the execution of transactions for the sale of securities on behalf of foreigners.

Russian officials discussed possible seizure of funds of foreigners and foreign legal entities. Possible seizure may refer not only to funds, but also to production facilities or whole assets of foreign entities. However there are no details if this will be implemented.

How foreign companies in Russia are affected:

  • 80% of income in foreign currency shall be converted into Rubles, applicable back-dated from January, 1st, 2022
  • Russian companies are prohibited to transfer and receive foreign currency to their bank accounts abroad
  • Russian companies are prohibited to provide loans in foreign currency to foreign companies
  • Foreigners will not be able to sell out securities on the Russian market

It is recommended:

  • to temporary refrain from operations with Russian securities
  • to check the volume of foreign currency transactions and assess the impact of exchange rate fluctuations on your financial stability

Russia: governmental measures to ensure financial stability

Special governmental permit is required for:

  • Lending in rubles to persons from the US and other countries that have imposed sanctions on Russia
  • Transactions on transfer of ownership on real estate and securities
  • Central Bank of Russia established 30% minimum commission for individuals who purchase USD, EURO and GBP on the Russian stock exchange.

Export of foreign currency in cash in the amount exceeding $ 10,000 is prohibited.

30% commission for purchase of foreign currency by any individuals after March 3, 2022:

Central Bank of Russia established 30% minimum commission for individuals who purchase USD, EURO and GBP on the Russian stock exchange. This blocking measure shall prevent mass conversion of rubles.

Emergency support measures in Russia

  • Suspension of the regular control inspections for SMEs and IT-companies until the end of 2022 (except for tax inspections);
  • Simplification of state procurement procedures;
  • Special regulations for purchase of medicines, including preventing of export of some of them;
  • Credit vacations for natural persons and SMEs for maximum 6 months until 30.09.2022.

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