War in Ukraine: Impact of EU Sanctions on Russia

Dominating the current news cycle is the war in Ukraine and the sanctions various countries have adopted against Russia. The U.S. news media have covered the U.S. sanctions in detail, but it is also important to understand the EU sanctions for companies operating in Russia or business conducted with Russian companies. Specifically, to date there have been five sanction packages passed and a sixth which has been proposed, detailed below. While not intended to be an exhaustive list (certain exceptions apply on most items), one can understand the far-reaching global impact of these sanctions.

First package of sanctions – February 23, 2022

• Ban on transactions with designated persons and companies that are determined to be assisting in limiting Ukraine’s ability to function as an independent nation
• Regional economic embargo
• Funding restriction

Second sanctions package – February 25, 2022

• Tightening of export controls
• Restrictions on financing
• A ban on Russian-operated aircraft in EU territory
• A prohibition of transactions related to the management of reserves, as well as assets of the Central Bank of Russia
• Visa facilitation for persons from Russia, including for business purposes, has been reversed

Third sanctions package – March 1, 2022

• Exclusion from the SWIFT system for seven Russian banks
• A prohibition of investments or participations in projects co-financed by the Russian Direct Investment Fund
• A prohibition of the sale or delivery of banknotes denominated in euro to Russia or for use in Russia
• A prohibition of specific transactions with the Central Bank of Russia
• A ban on two Russian state media to broadcast in the EU
• Another Russian company and 26 persons were added to the EU sanctions list

Fourth sanctions package – March 15, 2022

• Export ban on luxury goods to Russia
• Investment ban on oil exploration and oil production
• In addition, business with 12 Russian companies and their holdings outside the EU was prohibited

Fifth sanctions package – April 8, 2022

• Ban on the purchase, import or transfer of coal and other solid fossil fuels to the EU if originated in Russia
• Ships registered under the Russian flag will be denied access to EU ports
• Ban on all Russian and Belarusian road transport companies to transport goods by road in the EU
• Sanctions against companies and individuals whose products or technologies have played a role in the acts of conflict

Sixth sanctions package proposed – May 4, 2022

• Phase out of:
  • Russian crude imports within six months
  • Refined products by the end of the year
  • Sanctions on war crime suspects

Careful planning should be undertaken for companies operating in Russia or business conducted with Russian companies to ensure that the identification of the goods, technologies, services and business partners and whether these new restrictions impact current business transactions. In addition, if operations in Russia or business transactions with Russia companies cease, business entities should ensure that proper Russia compliance requirements are followed to exit Russia. During this difficult and ever-changing global economic environment, McGuire Sponsel can assist your client’s as they navigate the complex tax, legal and business hurdles. If you have any questions about our team or any global business issue, do not hesitate to reach out.