On 1 November 2018 the Cabinet of Ministers of the Russian Federation issued Resolution No. 1300 On Measures for Implementation of the Order of the President of the Russian Federation dated 22 October 2018 ("Resolution").

The Resolution introduces sanctions against a number of Ukrainian individuals and entities (around 400 persons in total). The list of individuals and entities, who are subject to sanctions ("Sanctioned Persons"), is detailed in the annexes to the Resolution. The restrictions mainly include freezing of funds, securities and assets, as well as bars on transferring capital outside Russia.

The sanctions were imposed, inter alia, on Ukrainian agricultural holding Mironivsky Hliboproduct, iron-ore group Ferrexpo, Pokrovskyi Mining and Concentration Complex, sunflower oil manufacturer Kernel Holding, heating and power equipment manufacturer UkrHimEnergo, Kryvorizhskyi iron-ore complex, manufacturer of chemical fertilizers Azot, agricultural company Nibulon, Ukrspirt state company, EastOne Group Ltd, Fozzy Group and other companies.

ISSUES TO CONSIDER

The biggest burden of sanctions falls directly on the Sanctioned Persons who obviously will face serious difficulties with export-import and other transactions with Russian business partners. That being said, the enactment of the sanctions affects not only the Sanctioned Persons, but their counterparties as well.

In particular, the Sanctioned Persons are likely to suspend fulfillment of their obligations under the contracts which involve transferring of assets into the Russian Federation due to the risk of those assets being frozen.

Additionally, freezing of assets of the Sanctioned Persons may have a negative impact on their financial situation and may result in defaulting on their contractual and other obligations.

RECOMMENDED ACTIONS

In order to minimize the risks associated with the new sanctions, we recommend reviewing the full list of the Sanctioned Persons and:

  • analyze the impact of imposed sanctions on business activity of the Sanctioned Persons;
  • analyze existing business relations and operations with the Sanctioned Persons;
  • evaluate possible effect that imposed sanctions may have on business relations and operations with the Sanctioned Persons; and

consider the possibility of restructuring the contractual relationships with Sanctioned Persons or applying other measures to mitigate risks.