Currency Regulations and other Economic Measures
Due to the Decree of the President of the Russian Federation from February 28, 2022 N 79 "On the application of special economic measures in connection with the unfriendly actions of the United States of America and foreign states and international organizations that have joined them":
- a provision was introduced for the mandatory sale by Russian exporters of 80% of foreign exchange earnings under foreign trade contracts. This requirement also applies to the proceeds already credited to the accounts of resident participants in foreign economic activity starting from January 1, 2022;
- from March 1, 2022, residents (Russian legal entities and citizens, but not local branches of non-Russian entities) are prohibited from providing foreign currency in favor of non-residents under loan agreements and crediting foreign currency to their bank accounts outside the country, as well as making transfers without opening a bank account using ESP provided by foreign payment service providers;
- until December 31, 2022, PJSCs can acquire their shares subject to a number of conditions.
Following the Decree N 79 - Decree of the President of the Russian Federation from March 1, 2022 N 81 "On additional temporary economic measures to ensure the financial stability of the Russian Federation" was introduced, aiming to restrict divestment of foreign investors from their Russian assets. Decree N 81 provides for, inter alia:
- from March 2, 2022, a special procedure, namely, obtaining approval by a special Government Commission, for making certain transactions with persons of foreign states that commit unfriendly actions, is introduced. A certain transaction may not be performed if a permission is not granted by the Commission. In particular, these transactions include the provision of credits and loans (in rubles) to foreign investors, as well as transactions that entail the emergence of ownership of real estate and securities.
- from March 2, 2022, a ban on the export of cash in foreign currency exceeding 10 thousand US dollars was also introduced.
The introduction of a procedure, implying the need for permission, may complicate the efforts of international investors to divest their interests in Russian businesses and real estate. Nevertheless, currently not much can be predicted as the enforcement practice did not develop any positions on the topic.
Further Rules on obtaining permits for the performance by residents of transactions (operations) with foreign persons were approved by the Decree of the Government of Russia from March 6, 2022 N 295.
By means of Federal Law N 30-FZ from March 4, 2022 "On Amendments to the Federal Law "On Measures to Influence Persons Involved in Violations of Fundamental Human Rights and Freedoms, Rights and Freedoms of Citizens of the Russian Federation" and Article 27 of the Federal Law "On the Procedure for Departure from the Russian Federation and Entry into the Russian Federation", the list of persons subject to counter-sanctions has been adjusted. Now the latter includes citizens of any country, not only the United States, as well as stateless persons. Counter-sanctions include a ban on entry, seizure of assets, suspension of the activities of Russian branches of controlled organizations.
Decree of the President of the Russian Federation of March 5, 2022 N 95 "On the temporary procedure for the fulfillment of obligations to certain foreign creditors" from March 5, 2022, established a special temporary procedure for the fulfillment of obligations to certain foreign creditors. Due to the named procedure Russian citizens and legal entities, as well as the state, its regions and municipalities having foreign exchange obligations to foreign creditors from the list of “unfriendly countries”, will be able to pay them in rubles. The temporary procedure applies to payments exceeding 10 million rubles per month (or a similar amount in foreign currency equivalent).
The Decree of the Government of the Russian Federation from March 5, 2022 N 430-r specified the list of “foreign states and territories committing unfriendly actions against the Russian Federation, Russian legal entities and individuals”. The latter includes the following countries:
- Australia
- Albania
- Andorra
- Great Britain (including the island of Jersey (crown possession of the British crown) and controlled overseas territories - the island of Anguilla, the British Virgin Islands, Gibraltar)
- Member States of the European Union
- Iceland
- Canada
- Liechtenstein
- Micronesia
- Monaco
- New Zealand
- Norway
- The Republic of Korea
- San Marino
- North Macedonia
- Singapore
- United States of America
- Taiwan (China)
- Ukraine
- Montenegro
- Switzerland
- Japan
Export and Import of Goods
Due to the Decree of the President of the Russian Federation of March 8, 2022 N 100 "On the Application of Special Economic Measures in the Sphere of Foreign Economic Activity for the Purpose of Ensuring the Security of the Russian Federation" a ban and restrictions are introduced on the export from the territory of the Russian Federation and (or) the import into the territory of the Russian Federation of products and (or) raw materials according to the lists determined by the Government of the Russian Federation. This ban will take place until the end of 2022.
What next?
On March 10, 2022 the second government package of bills (N 84920-8, N 84923-8, N 84931-8, N 84933-8, N 84949-8, N 84991-8) in connection with sanctions was submitted to the State Duma, therefore, it can reasonably be assumed that the counter-sanctions measures will be broadened in the nearest future. Press reports state that an initiative on enabling imposition of “external administration” by a court order on organizations that are at least 25% owned by foreign persons of “unfriendly states” in case the latter cease operations in Russia, was approved. This initiative was designed in order to prevent bankruptcies and preserve jobs. At the same time, it may violate the rights of such organizations and actually prohibits international investors from leaving the market to comply with the sanction-regime introduced by the international community.
Our team monitors the initiatives being considered and updates the counter-sanctions introduced on an everyday basis. We are always available for discussing the current events and providing support for our clients facing challenges due to the sanction and counter-sanction regimes.