Are Your Exports Affected by Sanctions on Russia? It’s Not Always Easy to Tell
Sanctions imposed on Russia for its invasion of Ukraine are having an undeniable impact on global supply chains, but individual companies might have a hard time determining precisely how they’re affected.
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It’s not a matter of simply banning any product or commodity moving in or out of Russia. The U.S. doesn’t have a full-scope embargo on trade with Russia, as it does with Cuba, North Korea, Iran and Syria, explains attorney Matthew Thomas, partner in the international trade practice of Blank Rome LLP. “The analysis has to be sophisticated when you’re looking at Russia trade,” he says. “It requires a layered approach to minimizing compliance risk.”
There are broad sectoral restrictions on U.S. trade with Russia, in areas such as professional services (accounting, management consulting and the like), imports of Russian energy products, and technology with military application. “Beyond that,” says Thomas, “you’re looking at a lot of screening.” An effective analysis must include every partner in the global supply chain, including sellers, buyers, banks and transportation and logistics providers. “Just figuring out who are the relevant parties can be “an extraordinarily challenging undertaking.”
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Nor is the situation by any means static. New and tougher strictures on Russia are being imposed by the U.S. and its allies on a regular basis. What’s legal today might subject a company to heavy fines or even criminal prosecution tomorrow. “There are activities that remain permissible, but in some respects it’s a shrinking island,” says Anthony Rapa, partner and lead in Blank Rome’s national security team.
Among the major Russian targets of U.S. and European Union sanctions is the country’s banking sector. The goal is to bar Russia from access to foreign capital, by freezing accounts outside the country and preventing cross-border financial transactions. “The listing of most Russian banks as targets has made it exceedingly difficult for companies to do business in Russia, even if they’re not operating in a restricted sector,” says Rapa. “There are still some non-sanctioned retail banks operating in Russia, but the payment side is getting more difficult.”
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“Are Your Exports Affected by Sanctions on Russia? It’s Not Always Easy to Tell,” by Robert J. Bowman, was published in SupplyChainBrain Think Tank on July 25, 2022.