How to deal with the sanctions labyrinth?

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What do the new sanctions really forbid?

On September, 12, the EU and the US issued new sanctions against Russian companies and economy sectors. Canada followed on September, 16. As new sanctions regulation is getting more and more complicated, we at RUSSIA CONSULTING have prepared this newsletter with the explanations of the most important changes and – most important – explanation of the overall picture in order to keep the overview.
Access the full newsletter including the updated sanctions list as a PDF.

What is new? – The EU

First, the EU has four different types of sanctions now.

There is the “red list” (see Appendix I below) of private persons and companies, with whom it is not allowed to deal at all (“No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of natural or legal persons, entities or bodies listed”), this list has been expanded and 24 new persons have been added on the list to a total of 119 private persons and 23 companies. There are restrictions on the access to the capital market for the Russian state-owned companies (public interest of over 50%), mentioned in the sectorial sanctions list. The following amendments were made: state-owned banks from this list may not get access to the capital market instruments with maturity of over 30 days (before: over 90 days). State-owned arms producers and oil companies have also been added to the sanctions list, falling under the same over-30-days regulation. The new list with arms producers and oil companies includes the following important companies: Rosneft, Transneft, Gazprom Neft, Oboronprom, Uralvagonzavod and United Aircraft Corporation. Sectorial sanctions list contains now 11 legal entities.

New types of sanctions are on the special list of companies that are banned from receiving goods of dual use. Currently, there are 9 companies in this list (see Appendix I below), mostly arms producers. Now it is also forbidden to provide any financial support to dealing with dual-use goods in relation to these companies.

Finally, the former sectorial sanctions (ban on certain investments in Crimea, on military exports to Russia, on export of certain oil drilling technologies as well as restrictions on exports of goods of dual-use) was expanded too, by export bans for off-shore oil platforms and for other technologies that are necessary for oil exploration in Arctic or for shale oil exploration. The already signed contracts may be continued.

What is new? – The USA

The US has introduced more restrictions on capital market access for the Russian companies. All transactions in new debt of longer than 30 days maturity, as well as provision of financing of such debt or other dealings with such debt are forbidden in relation with the banks and the defense companies from the current SSI list (Sectorial Sanctions Identification, see Appendix I below). The same activities in relation with the companies from the energy sector, mentioned in the current SSI list are forbidden, only for the debt of longer than 90 days maturity. No new persons have been put on the list. The US sanctions SDN list (Specially Designated Nationals List, forbids any economic contacts with the listed persons) contains currently 57 private persons and 36 legal entities, the SSI List contains currently 14 legal entities.

What is new? – Canada

Canadian sanctions list consists of three parts: Schedule 1, Schedule 2 and Schedule 3. Any economic contacts are forbidden with the persons from Schedule 1 list. This list has been expanded by 4 new private persons and 5 new companies (mostly arms producers and high-tech concerns). Schedule 2 list, which forbids dealing with a loan, bond or debenture of the listed companies, has been expanded by the biggest Russian state-owned bank Sberbank. Schedule 1 list contains now 66 private persons and 34 legal entities, Schedule 2 list contains 6 legal entities and Schedule 3 list contains 1 legal entity.

An important change in the regulation is that the companies from Schedule 2 list are now banned from financial market instruments with maturity of longer than 30 days (former: longer than 90 days), it is also forbidden to deal with shares of these companies. The companies from Schedule 3 list (currently only one company: Novatek) are only banned from access to the capital market instruments (loan, bond or debenture) with the maturity of longer than 90 days. These two bans (according to Schedule 2 and 3) are also applied to the subsidiaries which are owned by 50% or more of the listed companies.

What penalties can I face?

It is important to know that not only a knowingly and willingly violation of the sanctions is punishable (fines up to 1 million USD per transaction or imprisonment up to 30 years in the USA, or imprisonment up to 10 years in Germany), but also negligence.

What to do to protect myself?

As new sanctions are getting more and more complicated, including in total about 200 private persons and companies affected by different sanctions regimes, it is highly important to check every economic contact and every deal to be on the safe side. We, at RUSSIA CONSULTING, have developed our own search engine that allows to check the structure of ownership of almost every Russian partner/supplier/client company and to compare it with the sanctions lists. This procedure allows our clients to find out, whether their partner/supplier/client company is affected by sanctions and whether the economic contact with this company is allowed.

Access the full newsletter including the updated sanctions list as a PDF.