When Russia illegally annexed Crimea in 2014 what followed was a package of sanctions from the EU and US seeking to punish Russia and deter it from making any further moves to occupy the former Soviet state of Ukraine.

Russia’s invasion of Ukraine in the early hours of yesterday morning has prompted further restrictions to be imposed, and if your organisation has Russian business links you will need to be prepared to act quickly to ensure you do not fall foul of them.

Aside from this, if you have employees working in or around Russia there are clearly serious health and safety issues to consider.

Trade Restrictions with Russia

The energy sector was heavily impacted when sanctions were imposed on Russia in 2014, with restrictions placed on oil-related activities in or related to Russia, and many individuals and organisations subject to asset freezes and travel bans.

Those restrictions are still in place, and with the UK no longer a part of the EU we are already seeing a divergence of the rules. While the UK sought to write existing EU rules into UK law, what has materialised in reality are very subtle differences which UK businesses need to watch out for. Those doing business in the EU and the UK have the added headache of grappling with both regimes.

The UK has been criticised for appearing weak in its response to what is happening in Russia, sanctioning a few banks and individuals which have been subject to restrictions in the US for years.

However, Boris Johnson announced an updated package of measures yesterday evening designed to encourage Russia to cease its actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.

The new restrictions place asset freezes on all major Russian banks, excluding them from the UK financial system. There is even a suggestion that Russia could be cut from the Swift international payment system.

More than 100 individuals or organisations have been added to the UK List of Financial Sanctions Targets, and there is a suspension of dual-use export licences which authorise export of components which can be used for military purposes.

Most significant for the energy sector is the UK’s plans to ban exports of high-tech goods and oil refinery equipment.

Existing restrictions (applicable to the UK) are:

• A ban on the provision of military goods to, or for use in, Russia, including supply of such goods from a third country to Russia;
• A ban on the export of energy-related goods to Russia without a licence. There is an outright ban on providing drilling, well testing, logging and completion services and specialised floating vessels to oil projects in deepwater, Arctic Circle or shale formations in Russia;
• Individual asset freezes and travel bans, including a ban on making funds and economic resources available to those individuals or organisations. Care should be taken to ensure that you do not deal with an entity owned or controlled by a listed organisation.

Penalties for a breach of these rules are significant, with an unlimited fine and/or a maximum of 7 years (for trade restrictions) and 14 years (for financial sanctions) imprisonment for individuals.

Further restrictions are expected in the coming days and weeks, so now is a good time to review your export and sanctions policies and ensure that you are ready to respond.

The US has also issued a package of measures against Russia, and if your business has links to the US, whether that is a parent or subsidiary, or even if you export US-origin goods or technology, you should keep up to date to make sure you continue to comply with your legal duties.

Anti-Bribery and corruption

Both Russia and Ukraine are ranked highly in relation to bribery risk in the Transparency International Corruption Perception Index, but the conflict is likely to increase that risk further, with the possibility of third parties giving or receiving bribes to secure business in an even more unstable economy.

You should review your bribery risk assessments and any relationships you have with agents or other third parties in or around Russia to ensure your control measures are robust.

Check your contracts to make sure you can get out of business arrangements quickly if you need to.

Health and Safety

Where you have employees working in and around Russia or Ukraine, you should be taking steps to review your arrangements to ensure the health and safety of those employees, and review and update your risk assessments and control measures.

Consider whether you should be moving them to a safer location, or removing them from these countries altogether. Our immigration team can help if you require advice on immigration and travel restrictions.

The situation in Russia and Ukraine is likely to dominate the headlines in the coming weeks and months.

Get in touch if you do business in these regions and you need advice on how to ensure you comply with your legal duties.

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