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US Announces Further Russia Restrictions, Russia Hits Back With Proposed Counter Measures

US Announces Further Russia Restrictions, Russia Hits Back With Proposed Counter Measures

Last month we gave you an update on the escalating political situation in Russia, and our views on the potential impact the imposition of further sanctions on Russia could have for organisations doing business - or thinking of doing business - there.

Since then the US and Russia have each strengthened their resolve to impose harsher restrictions against each other. On 6th April the US Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it was imposing restrictions on 7 Russian oligarchs and 17 Russian government officials, along with 12 entities owned or controlled by those oligarchs. This, the US government says, is to put pressure on these individuals who it says benefit too much from the Russian government.

These new measures will not just affect US organisations. Non-US subsidiaries of US parent companies could fall foul of the new restrictions if they cause US persons to become involved in a prohibited transaction with one of the newly listed individuals or entities. Mandatory sanctions are in place for any non-US subsidiary which breaches this restriction.

In response Russia announced on 13th April a raft of severe counter measures which, if implemented, could have significant implications for organisations doing business in Russia, regardless it seems of where they are incorporated. Of particular note are the following proposed measures:

  • Prohibition on the import of certain products, including agricultural, food and medicinal products, originating from the US and/or other foreign states;
  • Prohibition or restriction on the employment in Russia of US citizens and/or other foreign states, including highly qualified specialists. Whilst some US citizens are already prohibited from engaging in certain activities in Russia due to US restrictions, this proposed counter measure does not appear to be restricted to a certain type of activity or industry;
  • Prohibition or restriction on the export from Russia of goods made from rare earth metals by US citizens and/or other foreign states and/or entities that are more 25% owned, directly or indirectly, by US and/or other foreign entities.
  • A “catch all” measure whereby there can be prohibited or restricted the import into Russia of any other goods from the US and/or other foreign countries.

The measures have been drafted broadly and are currently being considered by the Russian government. What is meant by foreign countries is unclear, but the draft bill suggests that any foreign countries following decisions of the US in relation to the imposition of economic and trade sanctions against Russia are likely to be covered. A decision is expected on the implementation of the draft bill in the next few days.

With the escalating situation in Russia showing no signs of stalling, it is worthwhile taking steps to review your current business connections there and identify any risks which could be caught be an increase in restrictions, such as: personnel currently in Russia (and in particular whether any US citizens are involved), goods or services being supplied to Russia (and in particular whether any are of US-origin), any call-off agreements in Russia, and the identity of Russian counterparties, including distributors, suppliers, customers or clients. Having a plan in place, or at least knowing where your risks lie, is key to ensuring that you can respond to any escalation of the situation in Russia in a swift and cost effective manner.

By Lynne Moss
Senior Associate

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