The EU sanctions on Russia explained: What is still possible?

The EU has approved heavy sanctions against Russia in response to the military attack on Ukraine. How does this affect rail freight on the New Silk Road, which runs largely through Belarus and Russia? We discussed this with Sebastiaan Bennink, sanctions lawyer at BenninkAmar.

Russian Railways is on the sanction list. What does that mean?

The rail company is not fully targeted by the sanctions, it is mainly a financial limitation. As a result, they have limited access to the financial markets and you can no longer trade in their shares, for example. This is does mean not a complete asset freeze, so it is still possible to do business with Russian Railways.

It is also important to distinguish between the different types of sanctions. For example, the CEO of Rosneft is subject to sanctions, and you can no longer do business with him. As far as I know that is not the case with Russian Railways yet. Another example is the port authority of Sevastopol in Crimea, which is subject to the full asset freeze. If you pay them port fees, you are formally in violation.

But payments via Swift are blocked, right?

The blocking of Swift only applies to a limited number of banks; those that are subject to an ‘asset freeze’. There are still other banks available for Russian Railways. The current estimate is that 70 percent of Russian banks are affected, but the final list has not yet been published.

The situation is very fluid, so it could be different tomorrow. For the time being, you can still run trains via Russia and pay for it, taking into account the restrictions currently in force. But you have to keep an eye on the latest developments.

How fast does do things change?

The situation can be different from one day to the next. over the past 72 hours, the list of sanctioned individuals and entities has grown to some 654 individuals and 52 Russian companies. If they have majority interests or control in companies you want to do business with, the company may be subject to sanctions.

Public lists are available, for example from the European Union. These are updated daily, so make sure you have the most recent list. The United States also has its own list that you can check. Keeping track of everything is difficult, but important to stay compliant.

Can you get around the sanctions by using alternate routes?

No, it is forbidden to circumvent sanctions. That means that if you actually know that a transport to Russia would not be allowed under the current sanctions regime and you try to find an alternative, that is also prohibited.

China has not adopted the sanctions. Can you still do business through Chinese companies if they use Russian parties that would be on the sanctions list?

When you run a business, you are expected to know the rules and know who you are doing business with. If a European operator violates the sanctions, he can be penalised. This does not only apply to direct relationships, but to the entire supply chain. So if your Chinese counter partdoes business with parties on the list, you are also responsible for that. That is why it is important to take a good look at which parties are involved in a transaction.

A version of this article was originally published on our sister publication Nieuwsblad Transport.

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Author: Bart Pals

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