On 3 May, President Putin signed Decree No. 252 on Russian countersanctions against individuals and entities of the countries which have imposed sanctions on Russia (“unfriendly states” in the Russian official terminology).
In essence, this new Decree introduces the legal framework for blocking sanctions prohibiting: (i) Russian persons (comprising federal and regional state authorities, other state bodies, municipalities, organizations and individuals under the jurisdiction of the Russian Federation) from entering into transactions with (or discharging of obligations, including under deals already in progress, in favour of) designated persons from “unfriendly states”; and (ii) the export of raw materials/commodities/other products originating from Russia in favour of sanctioned persons or via sanctioned persons to third parties. The said restrictions would equally apply to entities under control of those who are directly designated.
It is currently unclear what the term, “individuals under the jurisdiction of the Russian Federation” means. It is not explained in the Decree and it is also not explained in the Russian Law on Special Economic Measures (that has been in place since the end of 2006). To give you an idea as to how this may be interpreted:
- Russian citizens and Russian legal entities located in Russia would clearly qualify;
- foreign subdivisions (representations and branches) of Russian legal entities are also likely to qualify; and
- Russian subdivisions of foreign entities and/or of foreign citizens in Russia and/or Russians residing outside of Russia may potentially qualify, but it is not clear at this point whether they will, or not.
The level of impact that this Decree will have on transactions involving Russia will only become clear once the list of sanctioned (designated) persons, as well as additional clarifications on the deals affected by this new Decree are determined by the Russian Government. This is expected to happen within 10 days of the Decree.