The European Union (EU) has announced a series of new sanctions (eighth package) against Russia in response to the country’s continued aggression towards Ukraine. The sanctions will target key sectors of the Russian economy, including the energy, financial, and defense industries. In addition, the EU is expanding its asset freeze to include more individuals and entities involved in actions against Ukraine’s territorial integrity. This article will review the main provisions of the new sanctions and their potential impact on the legal advisory services and IT sectors in Russia.
Prior to this eighth package of sanctions, the EU had already imposed seven packages of restrictive measures against Russia. These included asset freezes and travel bans on Russian individuals and entities, as well as sectoral sanctions targeting the energy, financial, and defense industries. However, this new package of sanctions will have a profound impact on legal services providers as well as IT companies with Russian clients. Namely, they will be prohibited from providing services to Russian state-owned or controlled entities subject to the asset freeze. In addition, the EU is expanding the geographical scope of the asset freeze to include the Ukrainian regions of Kherson and Zaporizhzhia. Consequently, any EU nationals working for Russian state-owned or controlled entities in these regions will be subject to the asset freeze.
If you are a business providing legal or IT consultancy services to clients in Russia, it is important to review the new sanctions and ensure that you are not inadvertently providing services to entities or individuals subject to the asset freeze. Furthermore, there are several key steps you can take to protect your business from the risk of sanctions enforcement, including: (1) implementing compliance policies and procedures; (2) conducting due diligence on new and existing clients; and (3) monitoring changes in the EU and U.S. sanctions regimes and your local government. Taking these precautions will help minimize the risk of your business being caught up in the new sanctions against Russia.
But what should you do if the majority of your clients are Russian state-owned or controlled entities? There are several strategies you can consider, such as: (1) refocusing your business on the private sector; (2) expanding your geographic reach to include other countries not subject to sanctions; or (3) divesting your Russian clients to another service provider. Let us elaborate further on each of these options:
- Refocusing your business on the private sector: If you primarily serve Russian state-owned or controlled entities, then you will need to find new clients in the private sector. This may require you to expand your marketing efforts and target new industries. However, this strategy comes with its own set of risks, as the private sector is not immune from the effects of sanctions. For example, companies may be reluctant to do business with a firm that has extensive experience working with Russian state-owned or controlled entities.
- Expanding your geographic reach to include other countries not subject to sanctions: Another option is to expand your business into other countries not subject to sanctions. This could involve setting up new offices or branches in these countries. However, this strategy may not be feasible for all businesses, as it requires significant investment and a certain degree of political risk. Consider focusing on Western Europe, the United States, or Asia instead.
- Divesting your Russian clients to another service provider: Finally, you could divest your Russian clients to another service provider not subject to sanctions. This would allow you to exit the Russian market without incurring any financial losses. However, it is important to ensure that the service provider you choose is reliable and has a good reputation.
At LEGID, we are experts in EU sanctions law and can help you navigate the impact of the new sanctions on your business. Whether you are a startup or an individual worker in the IT or legal service sector, we can help you understand how the new sanctions will impact your business and what you can do to minimize the impact. Contact us today to learn more: email@example.com