What do the sanctions against Russia mean for your company?

Since Russia's annexation of the Crimean Peninsula in 2014, there has been a tense relationship between Russia and Ukraine. As a result of Russia's recognition of the secession of the Luhansk and Donetsk territories in Ukraine, and most recently, Russia's invasion of Ukraine, tensions are reaching unprecedented levels. Several countries and associations, including the EU, have therefore, in response, imposed sanctions on Russia.

What do the sanctions entail?

Sanctions against Russia have been imposed by large parts of the West, including the United States, the United Kingdom, and the European Union. On Friday night, the EU Council adopted several new economic sanctions. The sanctions are both an extension and a tightening of already existing sanctions. They include;

• Freezing of funds of several Russian, Belarusian, and Ukrainian individuals and groups, including Putin's own funds
• Prohibition on making financial resources available to several Russian and Ukrainian persons
• Extension of the embargo against Crimea to the Luhansk and Donetsk territories
• Further restrictions on access to the EU capital market for a select number of Russian financial institutions and banks

This means that trade and exchange of payments to these individuals and groups is prohibited for Danish and European companies. For the time being, it will therefore affect your company if you trade with persons and/or companies that are affected by these sanctions. Among those affected by sanctions are five Russian banks.

The extension of the embargo also entails a ban on new investment, imports, and exports within the areas of Crimea, Luhansk, and Donetsk.

The sanctions relating to export entail a ban on the export of goods and technology that;

• Has dual use and therefore can also be used for military purposes
• Can contribute to Russia's military and technological improvement
• Can be used for oil refining
• Can be used in the aerospace industry

As a starting point, it is the exporter who is responsible for complying with the rules.

What does this mean for your company?

If you as a company trade with Russian companies or individuals, these restrictions can put an end to this trade. It will be prohibited to trade with the companies and persons covered by the sanctions. This applies both if the trade is with a direct trading partner, or if it is part of a link further out in the value chain.

IUNO’s opinion

As a starting point, there are not many Danish companies whose trade is directly affected by these sanctions. At the same time, Russia is currently in seventeenth place on the list of Denmark's largest export markets and the sanctions will therefore hit some companies harder than others. However, IUNO still recommends that Danish companies investigate whether they, at any stage in their value chain, enter into trade with the persons or Russian companies affected by the sanctions.

If you export to Russia, you should ensure that your products are not included in the EU checklist, or the list of products categorized as advanced technology. This is set out in the regulation’s appendix VII.

The EU is already working on a third package of sanctions and IUNO therefore believes that all Danish companies should follow the conflict closely, as the development of the conflict may affect operations and trade.

[Council Regulation (EU) 2022/328 of 25 February 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine]