Aug 20, 2014

Warning: Is Your Customer on the Sanctions List?

written by Michael Launer

Western companies that trade with Russian businesses - or with other companies that do business in Russia - risk violating US or European laws if those Russian trading partners are on either the US or EU sanctions list. The consequences of doing so can be devastating, not only from a legal, but also from a financial, standpoint.

The July/August issue posted by the World Affairs Journal has an important article written by Elena Servettaz, a prominent Russian-French journalist and newscaster at Radio France Internationale, who is based in Paris.

The article - entitled "A Sanctions Primer: What Happens to the Targeted?" - can be accessed here.

Not only are specific individuals black-balled, but any companies with which these individuals are associated are subject to the sanctions. In addition, any western company in which they own stock must report this fact to the government authorities.

As Ms. Servettaz states: "...any [western] company or bank doing business with an individual on the list is breaking the law and subject to a large fine. There is a huge public relations risk, as well as a huge financial incentive, for all American and European firms to avoid doing business with anyone on these sanctions lists."

In order to understand how far-reaching these sanctions may be, consider the following fact: Russia launches many of its satellites from the Baikonur facility in Kazakhstan, a former Soviet republic. Ms. Servettaz notes that, "In Baikonur, the main hub of Russian spaceflight, several projects have been suspended because any satellite equipped with American electronics was forbidden to lift off on Russian launchers."

In addition, any transaction in which part or all of the payment is delayed until goods are delivered may well be in jeopardy. After all, with the assets of such entities frozen, products sent "COD" may never be paid for.

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