Sanctions against Russia. Review.

27 apr 2022

International sanctions against Russia were officially imposed by the US and the EU back in 2014 in connection with the Crimean conflict. Subsequently, other States joined the above-mentioned entities.
In America, OFAC plays a key role among government agencies that monitor compliance with the restrictions imposed.
The Office of Foreign Assets Control takes measures to achieve the goals of national security and the goals of US foreign policy. The task of the sanctions legislation in this case is to isolate certain territories, countries, enterprises and individuals for committing illegal actions, regardless of the place of their activities.

What types of sanctions are there?

The current American and international legislation establishes a whole set of restrictions that may include:

  • Prohibition of conducting any activity and cooperation with entities that are included in the list of sanctions;
  • Freezing of assets of persons subject to US sanctions;
  • A ban on providing assistance to entities subject to the restrictions in question.

In addition, sectoral sanctions are quite common, which prohibit certain operations with enterprises from specific industries.

At the same time, the most popular type of sanctions is the inclusion of a subject in the SDN list (Specially Designated Nationals List). This is essentially a list of entities that are subject to restrictions. It is noteworthy that it includes both legal entities and individuals.

Please note that any company, half of which is owned directly or indirectly by an entity included in the SDN, is also automatically included in this list. Such a restriction creates additional difficulties in the process of compliance with legislation in the field of sanctions, since in fact it is necessary to check the entire ownership structure of the entity with which cooperation is planned.

The SDN list included almost all major banks in the country, including VTB, Sovcombank, Novikombank, Otkritie, Promsvyazbank, Sberbank and Alfa-Bank.

Earlier, more lenient sanctions were imposed against Sberbank. Sberbank was included in the CAPTA (Correspondent Account or Payable-Through Account Sanctions) list, which meant that American counterparties were not prohibited from economic relations with Sberbank, but US banks had to block Sberbank's correspondent accounts from March 26. That is, payments in dollars that are made through Sberbank are rejected if they pass through American banks (correspondent banks).

Alfa-Bank was also under sanctions: there was a restriction for it to raise capital, that is, Alfa-Bank could not issue new Eurobonds or place issues of shares.

Now the situation is more serious, since all American individuals have been banned from cooperating with the above-mentioned banks under the threat of liability. In particular, all relations with Alfa-Bank should be completed very quickly by May 6.

What do the banks say?

Sberbank and Alfa-Bank reacted almost immediately to the information about the sanctions.

Sberbank explained that the sanctions imposed will not have a significant impact on the bank's work and will not affect the service of Russians in any way, since the system has already adapted to the previously imposed restrictions.

Alfa-Bank gave more detailed comments that shed more light on the current situation. So, regarding foreign economic activity, Alfa-Bank explained the following:

"We are forced to stop any financial transactions with companies from countries that have imposed sanctions, as well as settlements in the currencies of these countries: American, Australian, Canadian dollars and pounds sterling. At the same time, we work with all other currencies as usual".

What do blocking SDN sanctions mean?

Firstly, inclusion in the SDN list means that it is impossible to work with dollars. This currency is now permanently unavailable to banks under sanctions.

Secondly, settlements in dollars with counterparties from the USA will not be possible for bank customers.

Thirdly, American persons are prohibited from opening accounts in these banks.

Fourth, banks will not be able to act as brokers for foreign securities, they will have to transfer them to other brokers.

Fifth, the complete freezing of assets of these banks in the United States.

Of course, such serious sanctions will have a significant impact on the economy. One thing is clear – a complete ban on working with the largest banks will further cut off Russia from working with foreign partners. We will monitor the situation and promptly advise our clients on all changes.

Further on the link you can find an overview of sanctions against Russia.

The team of the Law Office of St. Petersburg "Main Letter"

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