RUSSIA/UKRAINE RELATED SANCTIONS

On 12 July, the excerpt from the Decision of the Sub-Commission of the Government Commission on Control over Foreign Investments in the Russian Federation No 171/5 dated 7 July 2023 was published on the website of the Ministry of Finance. The decision rewrites the requirements for obtaining permits from the Government Commission, and the previous decisions are thus repealed.

The extract also introduces a number of new requirements for the approval of transactions related to shares and stocks in Russian companies (including sale, liquidation, contribution to the share capital) with persons from so-called "unfriendly" states, at the same time confirming or specifying the previously applicable requirements. The criteria for granting approvals for dividend payments are also updated according to the new extract, but remain without actual change in terms of content.

Author: Thomas Brand

The Russian government is planning to introduce a "windfall" tax - an extraordinary tax on excess profits to compensate for budget deficits. The legal changes have been drafted by the Ministry of Finance, but the corresponding bill has neither been published on the internet portal regulation.gov.ru, nor has it yet been introduced in the State Duma.

It is known from the media, however, that the corresponding amendments are to come into force from 2024, with the "windfall" tax to be paid by 28 January 2024 at the latest. At the same time, companies will have the option of paying the windfall tax early in 2023. In addition to Russian companies, permanent establishments of foreign organisations are also considered taxpayers. The amount of the "windfall" tax will be 10% of the profit increase in 2021-2022 compared to 2018-2019 (5% if paid early in 2023).

The windfall tax only applies to companies with an average profit in 2021-2022 of more than RUB 1 billion (approx. EUR 11.5 million). In addition, SMEs, oil, gas and coal companies, as well as companies established after 1 January 2021 (except in cases of reorganisation) are not subject to tax. Permanent establishments of foreign companies that commenced operations after 1 January 2021 are also not taxable.

The "windfall tax" is to be seen as a one-off crisis measure to support the Russian budget. Therefore, we expect that this measure will ultimately be introduced with minimal changes, despite criticism from many Russian companies.

Author: Thomas Brand

The Russian President has instructed the government to prepare proposals to clarify the procedure for issuing permits from the Ministry of Finance to pay dividends. The relevant instruction was issued following the results of the plenary session of the Congress of the Russian Union of Industrialists and Entrepreneurs (RSPP) and is to be implemented by 20 May 2023.

Currently, the total amount of restricted payments (including dividends, interest on loans) under the anti-crisis measures may not exceed RUB 10 million per month if such payments are actually made to companies associated with so-called "unfriendly" states (EU member states, the US, the UK, etc.). Otherwise, restricted payments are paid into a Type-C account, with further disposal of the funds restricted. Alternatively, approval may be obtained from the Ministry of Finance for disbursement in excess of RUB 10 million (approval procedure).

Although the approval procedure is generally regulated by law, a number of issues remain unclear. For example, the time limit for processing an application for the granting of a permit is not specified. The criteria for issuing permits to pay dividends are in place and include the introduction of KPIs (key performance indicators, e.g. production volume, number of employees, to be achieved by the end of a quarter) by the responsible ministry. At the same time, it is not always obvious which ministry should develop the KPI. In this regard, the specification of the approval procedure and the corresponding criteria could provide clarity.

Author: Thomas Brand

On 25 April 2023, Russian Presidential Decree No. 302 of the same date "On Temporary Administration of Certain Assets" entered into force. The decree creates a basis for temporary administration of assets of foreign legal entities and individuals from unfriendly states in Russia.

According to Decree No. 302, temporary management of the property of persons from unfriendly states in Russia can now be introduced in the event of deprivation or restriction of the property rights of Russian persons abroad or threats to Russia's national security. The unfriendly states include practically all countries of the West.

Such foreign administration may extend to movable and immovable property of foreign persons from unfriendly states in Russia, their securities, shares or stock in Russian corporations and other property rights. According to Decree No. 302, foreign administration is carried out for an indefinite period of time and is terminated by a decision of the Russian President.

According to the decree, its necessity is in response to the seizure or restriction of rights to Russian property abroad.

Author: Thomas Brand

The Russian Ministry of Finance and Foreign Affairs has publicly proposed to Russian President Vladimir Putin to temporarily suspend the application of double taxation agreements (DTAs) with all "unfriendly" states. The suspension would have a significant impact on the taxation of foreign companies in Russia. However, there is no talk of terminating the DTAs.

The notice was published on the website of the Russian Ministry of Finance (MinFin) on 15 March 2023. The list of "unfriendly" states includes about 60 countries, including all EU member states, the USA, the UK, Switzerland, Japan and other countries that have imposed sanctions against Russia.

The MinFin notice links this initiative to the sanctions imposed on Russia as well as Russia's recent inclusion in the EU list of "non-cooperative tax jurisdictions" ("EU blacklist"). The intention is to suspend DTA application "until Russia's violated rights are restored". Should Russia be removed from the EU "black list", the suspension could be lifted again. The list is due to be revised in October 2023.  

The suspension of DTAs may result in double taxation. In addition, concessionary rates and exemptions will cease to apply. This primarily affects so-called "passive" income: Interest, dividends, royalties. These are then taxed according to Russian rules: 15% for dividends, 20% for interest, royalties and other passive income from Russian sources. The latter will then also be subject to taxation in Russia, which was previously excluded by the DTAs.

Author: Thomas Brand

On 25 February 2023, the tenth package of EU sanctions against Russia was published in the Official Journal of the EU in the form of Regulation (EU) 2023/427. The regulations have been in force since 26 February 2023.

The new sanctions receive the following key points:

• 87 persons and 34 entities have been added to the list of persons, entities and bodies in the annexes to the regulation.
• The list of dual-use goods was expanded. In addition, goods that can be easily diverted to support the Russian war effort have also been banned. These include previously unprohibited heavy trucks (and their spare parts), semi-trailers, special vehicles, snowmobiles, power generators, binoculars, radar equipment, as well as goods for the construction sector such as bridge parts, forklifts, cranes, pumps and the like. In addition, complete manufacturing plants were banned to avoid circumvention opportunities.
• In addition, high-tech goods that could serve the development and expansion of industrial production in Russia were also included.
• The transit of dual-use goods or weapons through Russian territory exported from the EU to third countries is prohibited.
• The embargo on the aerospace industry has been extended, in particular to prevent circumvention of the existing bans. Bitumen, asphalt, carbon and synthetic rubber have been added to the list of goods from which Russia derives significant revenues (Annex XXI). According to Art. 3i, it is prohibited to purchase, import or transfer these goods directly or indirectly if they originate in or are exported from Russia. Direct technical or financial assistance, brokering services or other services related to those goods and technology, or to the provision, manufacture, maintenance and use of those goods or technology, are also prohibited.

Author: Christian Reichmann

Among the significant restrictive measures introduced with respect to companies operating in Russia with links to so-called "unfriendly" states is the obligation to obtain special permission for certain transactions from the Sub-Commission of the Government Commission for Control over Foreign Investments in Russia (Sub-Commission) / the Ministry of Finance. The procedure for obtaining the permits has so far only provided for the submission of an application to the competent authority. In December 2022, it was reported in media that additional criteria have been introduced. The relevant criteria are enshrined in the sub-commission's minutes, which have not been officially published. The criteria were only introduced in relation to

• transactions with shares in Russian companies and
• payment of dividends

In addition, the Ministry of Finance will take into account the retrospective analysis of previous dividend payments and the state authorities' estimate of the impact of the respective company's activities on the Russian economy, technological sovereignty, etc. when deciding whether to grant a permit.

Author: Thomas Brand

The European Union's 9th sanctions package entered into force with its publication on 16 December 2022 and includes the following further tightening of existing sanctions:

• New export controls and restrictions are introduced for dual-use goods and technologies, as well as for goods and technologies that could contribute to the technological strengthening of the Russian defence and security sector. This concerns, for example, generators, toy drones, laptops, hard drives, IT components, night vision and radio navigation equipment, cameras and lenses, and essential chemicals.
• A ban on the provision of advertising, market research, public opinion polling, product testing and technical surveillance services to the Russian Federation is introduced.
• The EU has extended the ban on new investments in the Russian energy sector by additionally banning new investments in the Russian mining sector, with the exception of mining and quarrying activities involving certain critical raw materials.
• As of 16 January 2023, EU nationals are prohibited from holding positions on the governing bodies of any Russian state-owned or state-controlled legal person, entity or body established in Russia.
• The list of persons, entities and bodies subject to financial sanctions has been significantly expanded.
• Additional Russian banks have been added to the sanctions list.

Author: Christian Reichmann

The European Commission has drafted a proposal to harmonise criminal offences and sanctions for violations of EU restrictive measures. Violations of EU sanctions will thus be punishable in the future.

Due to Russia's ongoing attacks on Ukraine, it is necessary to guarantee that the EU restrictive measures are fully implemented and that a breach of these measures will result in severe consequences. The proposed directive establishes common EU rules and the same level of penalties in all member states. This should make it easier to investigate, prosecute and punish breaches of restrictive measures in all Member States. The Commission proposal is thus intended to close existing legal gaps and increase the deterrent effect of breaches of EU sanctions.

The proposed Directive contains a list of breaches of EU sanctions that constitute criminal offences, e.g. evading or attempting to evade restrictive measures by concealing funds or property.

Depending on the offence, individuals can be sentenced to a maximum of at least five years' imprisonment and companies can be fined at least 5% of their total worldwide turnover.

Author: Lukas Leitner

Shareholders from "unfriendly countries" can from now on carry out transactions with shares and stocks of Russian banks and financial organisations only after obtaining the appropriate permission from the Government Commission on Control of Foreign Investments. This is provided for by Russian Presidential Decree No. 737 of 15 October 2022 "On Certain Issues of Conducting Certain Transactions (Operations)", which came into force on 15 October. The unfriendly countries include practically all states of the "Western bloc".

According to this decree, transactions that directly or indirectly result in obtaining, changing or terminating the right to own, use or manage more than 1% of the shares or interests in a Russian credit institution, insurance company, non-state pension fund, microfinance institution, management company, equity-based investment fund, mutual fund or non-state pension fund are subject to authorisation.

However, the Decree does not apply to transactions with shares and units forming the charter capital of credit organisations included in the list approved by the President of Russia pursuant to item 2 of Decree No. 520 of 5 August 2022 "On the Application of Special Economic Measures in the Financial and Fuel and Energy Sectors Due to Unfriendly Acts of Some Foreign States and International Organisations".

The same applies to transactions with shares and interests in the charter capital of Russian credit institutions belonging to persons not recognised as persons of foreign states committing unfriendly acts pursuant to item 12 of Presidential Decree No. 95 of 5 March 2022 and persons not recognised as foreign persons affiliated with such foreign countries pursuant to item 4 of Presidential Decree No. 254 "On Temporary Order of Fulfilment of Financial Obligations in the Field of Corporate Relations with Certain Foreign Lenders".

Author: Thomas Brand

The European Union's 8th sanctions package includes various further tightening of the existing sanctions in addition to the ban on legal advice already discussed in our article of 11 October 2022:

• Export restrictions have been added to limit Russia's access to military, industrial and technological goods and the development of the defence and security sector. These include a ban on the export of coal, specific electronic components built into Russian weapons, technical goods used in the aviation sector and certain chemicals.
• The additional import restrictions of almost €7 billion include finished and semi-finished steel products (some semi-finished products are subject to a transition period), machinery and equipment, plastics, vehicles, textiles, footwear, leather, ceramics, certain chemical products and jewellery.
• The sanctions lists have been supplemented by other persons and entities that are or were involved in the occupation of Russia, the illegal annexation and the sham "referenda" in the occupied territories/obblasts of Donetsk, Luhansk, Kherson and Zaporizhzhya regions. The EU's restrictive measure targets key decision-makers, oligarchs, high-ranking military officials and propagandists responsible for undermining Ukraine's territorial integrity. In future, sanctions may also be imposed on persons who violate the prohibition of circumvention of sanctions.
• The geographical scope of the special restrictions on non-Ukrainian government-controlled areas (in particular the ban on imports of all goods) is extended to all non-Ukrainian government-controlled areas in Kherson and Zaporizhzhya oblasts.
• The package begins the implementation of the G7 declaration for an oil price cap. In addition to the EU ban on imports of Russian crude oil by sea, this price cap, once implemented, would allow European operators to transport Russian oil to third countries and support the transport provided its price remains below a pre-determined ceiling. This should help to further reduce Russian revenues, keep global energy markets stable through continuous supplies, contain inflation and stabilise energy costs. This measure is to be closely coordinated with G7 partners. It may enter into force after 5 December 2022 for crude oil and after 5 February 2023 for refined petroleum products, if necessary, following a further decision by the Council.
• The package provides for additional restrictions on Russian state-owned companies: for example, it prohibits EU citizens from holding offices on the boards of certain companies ("Lex Schröder").
• Transactions with the Russian maritime registry are banned.
• In the area of financial, IT consulting and other business-related services, among other things, the existing bans around crypto assets will be tightened and the scope of services that can no longer be provided to legal entities established in Russia will be expanded (on the ban on legal consulting, see the article by Mr Leitner of 11 October 2022).

Author: Christian Reichmann

EU member states have agreed on an eighth sanctions package in response to the ongoing war in Ukraine. The recently published regulation provides, inter alia, that the provision of certain legal services is prohibited even to clients not on a sanctions list. According to Article 5n Regulation (EU) 2022/1904 amending Regulation (EU) No 833/2014 on restrictive measures, there is a prohibition on providing legal services, directly or indirectly, to the Government of Russia or to legal persons, entities or bodies established in Russia.

The provision of legal advisory services is exempted,

• which are strictly necessary to terminate contracts concluded before 7 October 2022 which are incompatible with this Article, or accessory contracts necessary for their performance, by 8 January 2023.
• which are strictly necessary for the exercise of the right of defence in legal proceedings and the right to an effective remedy.
• which are strictly necessary for ensuring access to judicial, administrative or arbitral proceedings in a Member State or for the recognition or enforcement of a judicial decision or an arbitral award from a Member State, provided that the provision of those services is in conformity with the objectives of this Regulation and Council Regulation (EU) No 269/2014.
• intended for the exclusive use of legal persons, entities or bodies established in Russia and owned or controlled solely or jointly by a legal person, entity or body incorporated or constituted under the law of a Member State, a country belonging to the European Economic Area, Switzerland or a Partner Country listed in Annex VIII,
• in the case of further exceptional circumstances, e.g. in the field of public health, humanitarian purposes, civil society activities for the direct promotion of democracy, human rights or the activities of diplomatic and consular representations.

In addition, there is a limited personal scope of application of the new Article 5n: according to the wording, legal advisory services to natural persons seem to be permitted (if they are not on a sanctions list, the known regulations of Article 5 aa of Regulation (EU) 883/2014 then apply).

Author: Lukas Leitner

The Russian President signed a decree on 8 September that makes the sale of shares in Russian companies subject to approval (Decree No. 618 of 8 September "On the Special Procedure for Conducting Certain Transactions Between Certain Persons"). The decree has already been published and thus entered into force.

The decree concerns transactions of shares in Russian limited liability companies whose shareholders come from "unfriendly states". These include, among others, all Western states. The reservation of approval also applies to sales to Russian natural persons or legal entities. As of now, such transactions are only allowed with the approval of the Government Commission for the Control of Foreign Investments in the Russian Federation. The procedure is to be defined in more detail by 19 September.

It is currently unclear whether and, if so, under what conditions approval by the government commission will be possible. Taking into account the political goals of excluding negative effects on the Russian economy, the granting of approval seems conceivable as long as the respective target company continues to operate.

The decree concerns not only purchase transactions, but all legal transactions that directly or indirectly lead to the establishment, modification or termination of ownership, usage or disposal rights over shares, as well as other rights that allow control over Russian limited liability companies to be gained.

Author: Thomas Brand

On 05.08.2022, Presidential Decree No. 520 "On the Application of Special Economic Measures in the Financial and Fuel and Energy Sectors in Connection with Unfriendly Acts of Certain Foreign States and International Organisations" was adopted. And it came into force immediately.

Until 30.12.2022 (but this deadline can be repeatedly extended), a ban applies to transactions with securities, shares (contributions), rights and obligations belonging to parties to agreements on the joint use of production capacities, agreements on joint activities and agreements on the implementation of investment projects in Russia, if the securities, shares (contributions), rights and obligations belong to foreign persons affiliated with non- friendly countries or persons controlled by these countries.

The prohibition applies in particular to transactions with

• shares forming the charter capital of joint-stock companies included in the list of strategic enterprises and strategic joint-stock companies approved by Decree of the President of the Russian Federation No. 1009 of 4 August 2004;
• shares, rights and obligations belonging to the parties to the Production Sharing Agreement for the Sakhalin-1 Project and the Agreement on the Development and Production of the Kharyaga Oilfield on the Basis of Production Sharing;
• shares, shares in the charter capital of business entities that are manufacturers of equipment for fuel and energy enterprises, oil refineries, producers and suppliers of heat and electricity (the list of such enterprises is approved by the President, as of 09.08.2022 not yet adopted), etc.

Transactions made in violation of these provisions are null and void. Transactions prohibited by the document may be carried out on the basis of special permission from the President.

Author: Thomas Brand

The Council adopts new measures aimed at strengthening existing economic sanctions against Russia, optimising their implementation and increasing their effectiveness.

The "maintenance and adjustment" package introduces

• a new ban on the purchase, import or transfer of gold originating in Russia, including jewellery;
• strengthened export controls on dual-use goods;
• the existing ban on access to ports extended to locks;
• clarified existing measures, for example in the area of public procurement, air transport and the judiciary;
• imposed sanctions on a further 54 individuals and 10 organisations, including the Mayor of Moscow and Sberbank, a major financial institution, as well as members of the "Night Wolves" motorbike club.

The new measures - like the previous sanctions - are not directed against Russia's food, grain or fertiliser exports.

Author: Christian Reichmann

Council Decision (CFSP) 2022/884 of 03.06.2022 states that "the provision of auditing services, including statutory auditing, accounting and tax consultancy services, and business and public relations consultancy services, to Russia

• the Government of Russia or
• legal persons, entities or bodies established in Russia should be

should be prohibited. This excludes official services:

• which are strictly necessary to terminate contracts concluded before 4 June 2022 which are incompatible with this Article.
• which are strictly necessary for the exercise of the right of defence in legal proceedings and the right to an effective remedy.
• intended for the exclusive use of legal persons, entities or bodies established in Russia which are owned or controlled, solely or jointly, by a legal person, entity or body incorporated or constituted under the law of a Member State.

Author: Lukas Leitner

The Commission presents a proposal for a Directive on asset recovery and confiscation. The proposed rules also apply to infringements of restrictive measures. The revision of the EU rules on asset recovery includes the following points:

• Expanding the mandate of Asset Recovery Offices: Enabling them to rapidly trace and identify assets of persons and entities subject to EU restrictive measures.
• Extending the possibilities to confiscate assets from a wider range of offences, including from the breach of EU restrictive measures, once the Commission's proposal to extend the list of offences with a European dimension has been adopted.
• Establish asset management units in all EU Member States to ensure that seized assets do not lose value and that seized assets that rapidly lose value or are costly to maintain can be disposed of.

Author: Lukas Leitner

The Commission proposes to add the violation of restrictive measures to the list of offences with a European dimension. This is intended to enable the establishment of a common minimum standard for offences and penalties in order to prosecute violations of restrictive measures equally in all Member States. In addition, the Commission publishes in a Communication how a future directive on criminal sanctions could be designed.

Among other things, the proposals presented are intended to ensure that assets of persons and organisations that violate the restrictive measures can be effectively confiscated in the future. The possible offences could include, for example, engaging in acts or activities that directly or indirectly seek to circumvent the restrictive measures, including by concealing assets.

Author: Lukas Leitner

The 27 EU member states have launched the fifth major package of Russia sanctions. This is to include an import ban on coal, wood and vodka as well as numerous other punitive measures. However, a transition period of four months is to apply to the import ban on Russian coal.

Also part of the sanctions package is to be a complete ban on transactions at the expense of four important Russian banks, including the second-largest Russian bank VTB. Russian ships and ships operated by Russia are also to be banned from entering EU ports. Exceptions are to be made only for the delivery of food, humanitarian aid and energy.

To further weaken the Russian economy, there are to be further restrictions on trade with Russia with a volume of around 10 billion euros. According to the Commission, these include quantum computers and means of transport. Products such as wood, cement and seafood worth 5.5 billion euros will also no longer be imported into the EU. Russian companies will also no longer be allowed to participate in public tenders in EU states.

In addition, further individuals close to Russian President Vladimir Putin are to be added to the sanctions list. Among those affected are his two daughters.

Author: Christian Reichmann

On 4 April 2022, a legislative draft that had already been announced in advance was introduced in the Russian parliament (http://duma.gov.ru/news/53947/), which provides for criminal liability for complying with Western sanctions against Russia. This is intended to prevent managing directors and other executives of Russian companies in particular from complying with sanctions directed against Russia and, among other things, from not cooperating with sanctioned Russian banks.

The draft provides for a prison sentence of up to 10 years and fines of up to RUB 1 million (approx. EUR 10,000), as well as the deprivation of the right to hold certain positions or perform certain activities for up to three years. In particular, managers of Russian subsidiaries may be caught in the middle, as they may be required by the parent company to comply with Western sanctions, which they are prohibited from doing under Russian law.

The draft law would add a new element to Article 201, namely the "execution of a decision by a foreign state or international organisation to impose restrictive measures against the Russian Federation". The draft is expected to be adopted and into force in the coming weeks.

Author: Thomas Brand

The Russian government plans to introduce a draft law "On External Administration for the Administration of Organisations" to the Russian parliament soon, which, among other things, will regulate the procedure for appointing an external administration for Russian companies with foreign shareholders from so-called "unfriendly states".

The draft law has already been approved by the "Government Commission on Legislative Activities". On 16 March, the tax authority and the Central Bank expressed their comments. Whether and when the draft law will be introduced into parliament, the Duma, is not yet certain.

The aim of the law is to prevent subsidiaries of foreign companies from ceasing their activities in Russia for no reason or for political motives, thus endangering jobs and the Russian economy as a whole.

Author: Thomas Brand

The military operations in Ukraine are continuing. Russia's military action continues to be accompanied by cyberattacks and attempts to exert influence.

Given the support of European countries for Ukraine, the risk of Russian cyberattacks against state agencies and companies is high. The recommendations for action of the German Federal Office for the Protection of the Constitution should be heeded urgently. Above all, the domain dienste-email.eu should be blocked.

Companies should continue to follow developments closely and adapt their IT security measures as necessary. The Federal Office for the Protection of the Constitution continuously updates its overview of the "Indicators of Compromises (IoCs)" at its disposal.

Author: Axel Berninger

The Russian President signed a decree on 18 March 2022 on further temporary measures in the area of foreign exchange regulation to ensure financial stability. The decree establishes a new procedure for settling obligations to certain foreign creditors. According to this decree, certain transactions require the approval of the Russian Central Bank. Normal commercial transactions are generally not affected. The granting of loans to subsidiaries and the distribution of dividends from Russian limited liability companies to their foreign shareholders are not affected by the decree.

In addition, the Central Bank is authorised to restrict the scope for remittances to foreign companies and individuals. The Central Bank may grant a resident person conducting foreign trade business permission to fulfil the requirements for compulsory exchange of foreign currency under Decree No. 79 of 28 February 2022 within a period other than that provided for, or to exempt it from compulsory exchange altogether. It regulates, for example, advance payments by residents in favour of non-resident legal entities and natural persons under contracts, transfers of funds from accounts opened with Russian credit institutions and the purchase of foreign currency on the Russian foreign exchange market.

Author: Thomas Brand

As a result of Russia's invasion of Ukraine, restrictive measures have been imposed on individuals and entities worldwide: The aim of these sanctions is to hold accountable those who support or benefit from the Russian invasion and thus undermine or threaten the territorial integrity, sovereignty and independence of Ukraine.
As of 15 March 2022, the European Union's sanctions lists, some of which were issued in response to the annexation of Crimea in 2014, include a total of 862 individuals, many of them Russian oligarchs, and 53 organisations (see also www.consilium.europa.eu/de/press/press-releases/2022/03/09/eu-imposes-restrictive-measures-on-160-individuals-as-a-consequence-of-russia-s-military-aggression-against-ukraine/). EU citizens and companies are prohibited from providing financial resources to these individuals and organisations. The assets of the sanctioned persons have been frozen and there is a travel ban on the named natural persons. Thus, if a individual or legal entity appears on a sanctions list, business dealings with them are prohibited. The relevant legal acts, including the names of the individuals and entities concerned, have been published in the Official Journal of the EU. Russian citizens who do not appear on a sanctions list are not affected by the measures.
Other sanctions include a ban on trade with Russia in so-called "dual-use goods", i.e. goods that can serve both civilian and military purposes. Similar sanctions lists exist in the USA, Great Britain and Australia.

Author: Lukas Leitner

The sanctions between the EU and Russia are hurting even uninvolved businesses. While the sanctions imposed by the EU (exclusion of several Russian banks from the SWIFT system, embargoes on certain groups of goods and the sanctioning of certain individuals) are well known, there is often no precise knowledge about the restrictions imposed by the Russian side, which also and especially affect Western businesses with activities in Russia. In this article >> we shed light on these regulations and answer the following frequently asked questions, among others:

• Do I have to exchange foreign currency received from abroad into rubles?
• Is it a punishable offense to stop doing business in Russia?
• How much cash may I export from Russia?
• May dividends and other payments from securities be made to foreign persons?
• Are transactions with real estate and securities in Russia subject to approval?

Authors: Thomas Brand and Christian Reichmann

In response to Belarus' involvement in Russia's unjustified and unprovoked military aggression against Ukraine, the Council adopts further targeted measures against the Belarusian financial sector.

The agreed measures have the following effects:

• Restriction on the provision of specialised messaging services for payments (SWIFT) to three Belarusian banks.
• Prohibition of transactions with the Belarusian Central Bank
• Ban on listing shares of Belarusian state-owned companies on EU trading venues and the provision of related services
• Significant restriction of capital inflows from Belarus to the EU
• Ban on the supply of euro-denominated banknotes to Belarus

In addition, the Council imposes further restrictive measures on the export of maritime goods and radio communication technologies to Russia.

Author: Lukas Leitner

The EU excludes seven Russian banks from the SWIFT system. This ensures that these banks are disconnected from the international financial system and affects their ability to operate globally. The seven banks are as follows: Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank, Sovcombank, Vnesheconombank (VEB) and VTB Bank.

In addition, the EU prohibits

• investing in, participating in, or otherwise contributing to projects co-financed by the Russian Direct Investment Fund;
• sell, supply, transfer or export euro-denominated banknotes to Russia or to natural or legal persons or entities in Russia.

Author: Christian Reichmann

Source: Website Council of the European Union

Russian companies are now required to exchange 80% of foreign currency received from foreign companies under foreign trade contracts into rubles. This requirement applies to foreign currency received in Russian accounts on or after January 1, 2022. The mandatory exchange must be made within three working days from the date of receipt of the foreign currency, or now for the first time for all amounts received since January 1, 2022. In addition, as of March 1, foreign exchange transactions related to the provision of foreign currency by residents in favor of non-residents under credit agreements are prohibited.

Author: Thomas Brand

Source: Presidential Decree No. 79 from 28.02.2022

A special procedure has been introduced for transactions with foreigners from unfriendly states (approval requirement by special government commission). The approval requirement applies to the granting of credits, loans, as well as for securities and real estate transactions (acquisition). In addition, a ban on export of foreign currency in cash equivalent to more than 10 thousand US dollars from Russia was introduced as of 02 March 2022.

Author: Thomas Brand

Source: http://publication.pravo.gov.ru/Document/View/0001202203010083