Russia Imposes a Series of Measures and Countermeasures to Address the Economic Impact of Sanctions

Key Takeaways

• Russia has imposed strict controls on foreign currency transactions.
• Russia has prohibited individuals and companies from sanctioned countries from obtaining loans, transferring securities and engaging in certain foreign currency transactions.
• Russia has limited the amount of cash that can be taken out of the country to an amount equal to roughly $10,000 USD.

In response to the economic sanctions and export controls imposed on Russia by the US, EU, UK and other major economies, Russia imposed measures and countermeasures.

Decree No. 79 “On the Application of Special Economic Measures in Connection with the Unfriendly Actions of the United States of America and Foreign States and International Organizations who have Joined the United States of America” (the “Decree of February 28, 2022”), which had immediate effect, provides for the following measures (among others):

• Russian residents participating in foreign economic activity must sell 80% of their foreign currency received under foreign trade contracts with non-residents (i.e., foreign persons) within 3 business days from the funds being credited. Foreign currency received starting from January 1, 2022 through February 28, 2022, must be sold by March 3, 2022.
• As of March 1, 2022, Russian residents are prohibited from providing foreign currency to non-residents under loan agreements.
• As of March 1, 2022, Russian residents are prohibited from crediting foreign currency to their accounts in foreign banks and other financial institutions and from transferring money without opening a bank account through foreign payment service providers. 
• Until December 31, 2022, Russian public joint stock companies (PJSCs) are restricted from repurchasing their own securities (subject to certain exceptions). 

In addition to the above measures, on March 1, 2022, a new presidential decree was adopted setting out further restrictive measures – Decree No. 81 “On Additional Temporary Economic Measures to Ensure Financial Stability of the Russian Federation” (“Decree of March 1, 2022”). The Decree of March 1, 2022, entered into force immediately and introduced special procedures applicable as of March 2, 2022 to transactions involving individuals and legal entities from so-called countries “performing unfriendly actions.”

• While there is no list of “unfriendly countries,” it is presumed to refer to countries imposing sanctions against Russia. Individuals and legal entities from countries “performing unfriendly actions” is defined to include citizens of such foreign countries, companies incorporated in such foreign countries, individuals and entities having a principal place of business in such foreign countries, and persons whose income is principally derived from such foreign countries (“Foreign Persons of Unfriendly Countries”).
• The following transactions are allowed only upon approval of the Governmental Commission for Control over Foreign Investment in the Russian Federation (“Governmental Commission”):
  • providing loans to Foreign Persons of Unfriendly Countries;
  • any transactions with Foreign Persons of Unfriendly Countries which would give rise to a property right to securities and real estate if the purchase was made after February 22, 2022.          
• Russian government approval is needed for any transactions with Persons of Unfriendly Countries involving securities, loans and foreign currency transactions.

• The Decree of March 1, 2022, also prohibits physical export of cash denominated in foreign currency and monetary instruments in foreign currency amounting to more than USD 10,000.

• The above restrictions do not apply to any transactions where the Russian Central Bank or any Russian state authority is a party.

The current situation is very fluid and more measures are expected in the coming days in response to the impact that the economic sanctions are having on the Russian economy. We are happy to answer your questions.