Foreign Trade01.03.2022 Newsletter

Ukraine war: applicable sanctions in a nutshell

War is still raging in Ukraine. The EU and the US imposed additional sanctions over the weekend. The press reported. Many companies feel very uncertain. What’s the situation? What’s still allowed and what isn’t?

We provide an overview of the sanctions imposed.

Focus on financial sanctions and individual sectors

The focus of both the US and European sanctions is on the financial sector and individual industrial sectors.

Many important Russian banks have been added to US and EU sanctions lists, meaning that transactions involving collateral and other financial instruments with these banks in particular are now prohibited. With some Russian banks, all business whatsoever has even been prohibited. If, presumably today or tomorrow, some Russian banks should be excluded from the SWIFT system, payment transactions with Russia will be made even more difficult. By all accounts, however, not all banks are going to be excluded from SWIFT, rather only those banks that are also on sanctions lists.

To do: Companies that do business with Russia should therefore already check today which banks are involved in the processing of their transactions and, if necessary, examine alternative payment transaction options.           

So far, the financial sanctions against Russian banks have mainly affected financial institutions.

The new EU Regulation, which is a total of 140 pages in length and came into force on Saturday, also prohibits transactions with certain goods and technologies to Russia or to Russian persons. However, by no means all industrial sectors are affected. The focus here is on goods from the following sectors:

  • electronics
  • IT and telecommunications
  • IT-security
  • sensors and lasers
  • aviation and maritime
  • navigation and drives
  • oil refinery
  • military or military-usable goods

In the USA, a "policy of denial" for the export of sensitive goods of the defence, aerospace, IT and maritime industries with US origin to Russia or Russian persons has been officially in effect for several days. This means that US authorities no longer approve the corresponding exports. This will also apply to so-called re-exports of US goods by European exporters. These goods, many of which were not previously subject to US controls when destined for Russia, include semiconductors, computers, telecommunications, information security equipment, lasers and sensors.

Companies that distribute, maintain, repair or provide support for the corresponding goods or technologies and that conduct direct or indirect business with Russia must now closely examine Annex VI of the new EU Regulation of Listed Goods. This contains technical descriptions of the goods concerned. In addition, because the US re-export issue, companies must now urgently take stock of which goods and technologies of US origin they use.

However, there are also exceptions to the prohibitions, amongst other things for humanitarian and intergovernmental purposes or for consumer use. Thus, even if a good or a technology is listed, this does not mean that fundamentally all business is now prohibited.

To do: check the product portfolio with regard to the goods list and the use of US goods and components.

New personal sanctions

The USA and EU have also imposed sanctions on individual influential persons and companies. According to these, in some cases no further business may be conducted with these persons nor economic resources be made available to these persons, not even indirectly. Under EU sanctions alone, more than 700 individuals and companies are currently affected.

Special attention now needs to be paid to sanctions screening - i.e. checking business partners against the sanctions lists. In recent days, it has become apparent that a legislative expansion of the sanctions list is easily possible. The fundamentals of screening and the need for up-to-date screening are therefore more important than ever.

To do: particular attention should be paid to sanctions screening. Screenings should ideally be performed on a daily basis.

US sanctions (only) indirectly affect European companies

Whether the ban on doing business with persons listed in the USA (so-called Specially Designated Nationals, SDN) is also legally binding for persons outside the USA (i.e. in the case of so-called secondary sanctions) cannot be explicitly derived from the sanctions. In the USA, however, it has so far been assumed that this is not the case and the material available to us also suggests the same. This means that EU companies should basically still be allowed to continue doing business with the listed companies. However, many EU companies have a policy of not doing business that involves SDNs, as even a violation of primary sanctions is considered risky for US business. Therefore, German companies may also be indirectly affected if they do business with listed persons. For US companies, this means that they now have to terminate their business with listed persons within the so-called wind-down period (by March 2).

Payments in dollars can also become problematic, as US banks have to be involved for the processing of such payments. The sanctions may now prohibit them from supporting such processing.

Where do we go from here?

The EU and USA are considering further sanctions by excluding Russian banks from the SWIFT system. It is not yet clear when this will happen and which banks will be affected. Whether and what further sanctions could follow from the US or EU side is also still uncertain.

What needs to be done?

  • Above all companies with substantial Russian business should set up a task force that certainly needs to cover the areas law, compliance, key account management and public relations.
  • The task force should ensure that goods and technologies are classified according to the new annexes to the Russia sanctions, that business partners and banks are screened and, if necessary, export freezes put in place.
  • In addition, the task force should monitor further legal developments in the USA and Europe. Close contact with the company management is strongly recommended. Some companies have divided these teams into responsibilities - for the USA and for the EU.

The possibility of having to make tough decisions now or in the near future cannot be ruled out.


Back to list

Mareike Heesing<br/>LL.M. (Köln/Paris I)

Mareike Heesing
LL.M. (Köln/Paris I)

Junior PartnerAttorney

Konrad-Adenauer-Ufer 23
50668 Cologne
T +49 221 2091 320
M +49 172 5798 005