Consultation for Sanctions in Russia

Sanctions between Russia and the European Union: What kind of influence may the recent sanctions have on your business in Russia? Is your business even affected by the sanctions? We determine the impact on your business and provide recommendations to be successful in Russia.

To which extent do the sanctions affect German companies?

Not all provisions regarding the sanctions are obvious and easy to implement. For instance regarding the European sanctions it is irrelevant, whether or not your company was registered in the EU. Instead, it is crucial, whether you are doing business in Europe or entertain business relations with European companies.
We determine, if and to which extent your company or your products are affected by the sanctions by looking into the recent regulations. Our experts check if your product or product category is mentioned in the lists of sanctioned products of the European Union and Russia.

What is sanctioned?

Easier verifiable sanctions include trade in dual-use military equipment and dual-use items. More complex is the situation in the implementation of sanctions against the listed natural and legal persons. For companies operating in Europe, there is a ban on direct or indirect economic interaction (provision and payment prohibition) against the sanctioned persons. The prohibition of provision and payment covers the following:

  • the provision and payment of services:
  • transfers of funds
  • sale of goods
  • provision of services
  • asset management
  • provision of other economic resources, e.g: Cash, cheques, money claims. Deposits with financial institutions, publicly and privately traded securities and debt instruments, including stocks and shares, interest, dividends or other income, loans, guarantees, bank guarantees, documents showing signs of participation in funds, etc.

What do the sanctions mean for you in practice?

We examine your Russian projects with regard to a direct or indirect participation of a listed person and give concrete recommendations for action for your business.

Companies trading in Russia or with Russian companies are not only confronted with European and Russian sanctions, but also have to deal with possible consequences imposed by the USA. Under certain circumstances, German companies may also be subject to American sanctions. Our lawyers will advise you and ensure that your business in Russia does not cause any repercussions for the overall company.

Another form of sanctioning is the increase in the requirements for obtaining the “Made in Russia” label. The label can open the door to attractive tax benefits and future government contracts for foreign companies. However, various requirements for localization must be taken into account, which currently make it more difficult particularly for foreign companies to obtain the label.

EU sanctions against Russia

The European Union has so far imposed the following sanctions against Russia:

  • Trade sanctions on arms, dual-use goods and restrictions in the energy sector. As one of the first actions of the European Union, the direct or indirect sale, import or export to Russia of arms and related materiel of all types, including weapons and ammunition, military vehicles and equipment, paramilitary equipment and spare parts, has been banned. Brokering services, technical assistance and the provision of financial resources related to arms are also prohibited. Any existing contracts concluded prior to the introduction of the sanctions shall remain unaffected. The energy industry in Russia is also sanctioned by the Decree of 31.07.2014. Since the decree it requires authorisation to sell, transfer or export certain “technologies suitable for the oil industry for use in oil exploration and production in the deep sea and Arctic and in shale oil projects in Russia” to Russia.
  • Financial sanctions affect the assets invested in the EU by legal persons, institutions and organizations which are negatively associated to the annexation of Crimea. In addition, certain Russian banks are also affected by the sanctions. Among the banks are Sberbank, Vneshtorgbank (VTB), Gazprombank, Vnesheconombank (VEB) and Rosselkhozbank. In the oil sector, the companies concerned are Rosneft, Gazpromneft and Transneft. In the defence sector, OPK Oboronprom, Uralvagonzavod and United Aircraft Corporation (OAK) are sanctioned. The sanctions are designed to obstruct banks’ access to foreign capital, as the sanctions have banned the trading of shares and bonds held by these banks in the EU.
  • Sanctions against natural and legal persons (ban on payment and provision). Another central component is the sanctioning of natural and legal persons. The severity of sanctions for the listed persons can vary: Either an entry ban can be issued by the European Union or the foreign assets of the sanctioned person can be frozen. In any case, a ban on provision and payment is imposed against this person. At the present time (September 2018), 168 natural persons and 45 organisations are listed.
  • Prohibition of provision and payment
    • Money transfers
    • Sale of goods
    • Provision of services
    • Asset management
    • Provision on other financial resources, e.g: Cash, cheques, money claims. Deposits held at financial institutions, publicly and privately traded securities and debt-claims, including stocks and shares, interest, dividends or other income, loans, guarantees, bank guarantees, documents showing signs of participation in funds, etc.

American sanctions against Russia

  • Trade sanctions are to be applied similarly to the European sanctions: trade in military equipment and dual-use goods is prohibited. There are also restrictions in the energy sector. Contrary to the European decisions, the sanctions also apply to projects in in which listed companies have a share of more than 33% (Section 223 of the Countering America’s Adversaries Through Sanctions Act).
  • Financial sanctions are applied analogously to European sanctions. Currently there are 167 banks and financial institutions on the index.
  • Sanctions against legal or natural persons analogous to the European sanctions: any direct or indirect economic interaction is prohibited, currently 292 natural and 175 legal persons are listed.
  • The “Countering America’s Adversaries Through Sanctions Act” (CAATSA) imposed sanctions explicitly directed at non-US persons. Under these sanctions, natural and legal persons in the EU are prohibited from carrying out significant transactions with any listed person.

Countermeasures by the Russian Government

  • Entry bans against numerous Western politicians and business representatives
  • Economic measures such as import bans on agricultural products and groceries from the EU, the USA, Canada, Australia and Norway. The list of prohibited goods also includes beef, fish, poultry, milk and other dairy products, seafood, vegetables, fruit and nuts.
  • Opaque localization requirements and location conditions make it difficult for foreign companies, to obtain for example tax benefits under the label “Made in Russia”. Foreign companies can of course continue to invest in Russia. However, in order to be on an equal footing with Russian companies when it comes to lucrative state contracts, it is necessary to comply with sophisticated localization regulations.
  • Additional countermeasures, such as criminal prosecution for companies complying with western sanctions, are currently still being explored.

We offer the following services on the issue of sanctions:

  • Legal investigations and expert opinions regarding your product
  • Verification of the listing of your product in the sanctions lists of the EU, Russia and USA.
  • Research of the current legal situation regarding your company
  • Legal review of your business and business partners- Investigation of business locations and contracts for a prospective application of sanctions

Further reasons to work with Rufil Russia Consulting in Russia

  • we are a quality, service and customer oriented company
  • all of our employees stick to our corporate principles
  • we are a German company and adhere to German virtues
  • we work in Russia since 2007
  • through our services and performances we support international companies in Russia and generate that way a higher quality of life for our clients, employees and investors
  • we have access to a well-functioning network of experts in several business areas in Russia

Our quality promise:

“Your contact person will be a lawyer proficient in English, Russian and German as well as a qualified Russian senior specialist with a good command of English who regularly participates in professional training, is permanently employed at Rufil Russia Consulting and based at our office in the very center of Moscow. Don’t settle for less!”

In our office in Moscow work highly qualified accountants, auditors, finance experts (IFRS, US-GAAP, HGB, Russian GAAP), tax consultants, experts and programmers for automation, accounting software and IT solutions as well as international management consultants. Our working languages are English, Russian and German.

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