In brief: Australia has imposed sector-wide prohibitions on a range of imports to, exports from and commercial activities with Russia, Crimea and Sevastopol. Partner Rachel Nicolson (view CV), Associate Andrew Wilcock and Law Graduate Alice Crawford report on how these sanctions will impact on companies engaged in business in these regions.

HOW DOES IT AFFECT YOU?

  • Companies engaged in commercial activities with Russian banks, oil companies or defence companies will be most affected by the sanctions
  • Any companies involved in the transport, telecommunications, energy or resources sectors in Crimea or Sevastopol will also be affected
  • Companies with connections to Russia, Crimea or Sevastopol should review their operations to ensure that they comply with these sanctions

BACKGROUND

In February and March 2014, the EU and the US imposed financial sanctions against a number of Russian and Ukrainian companies and individuals (including prominent politicians and business leaders) in response to the developing conflict in Crimea and Eastern Ukraine. Australia imposed similar targeted financial sanctions in June 2014.

In July and August 2014, following the downing of Malaysian Airlines flight MH17, the EU and US imposed expanded sanctions targeting the Russian defence, finance and oil and gas sectors.

In August 2014, in response, Russia imposed sanctions against Australia and certain other countries (including EU member states and the US) prohibiting certain food imports.

On 1 September 2014, the Prime Minister Tony Abbott announced that the Australian Government would implement further autonomous sanctions against Russia. After a period of public consultation, the Government amended the Autonomous Sanctions Regulations 2011(Cth) to give effect to expanded sanctions against Russia, Crimea and Sevastopol on 31 March 2015. The expanded Australian sanctions have been specifically drafted to align with EU and US sanctions.

KEY PROHIBITIONS AND RESTRICTIONS

Restrictions on commercial activities

The expanded sanctions restrict Russian access to Australian capital markets and Australian trade and investment in Crimea and Sevastopol by prohibiting persons or entities from engaging in a range of commercial activities with Russian state-owned banks, entities selling or transporting crude oil or petroleum products, and entities involved in military supplies and services. These include:

  • the direct or indirect purchase or sale of, or any other dealing with, bonds, equity, transferable securities, money market instruments or other similar financial instruments; and
  • the indirect or direct provision of loans or credit.

Certain commercial activities are exempt under the regulations, including:

  • buying or selling derivative products whose value is linked to a sanctioned commercial activity;
  • granting loans or credit that provide financing for non-prohibited imports or exports of goods and non-financial services between Australia and Russia;
  • providing certain emergency funding to meet solvency and liquidity criteria; and
  • making drawdowns and disbursements made under a contract concluded before 31 March 2015.

The sanctions also prohibit a person or entity from making any investment in Crimea and Sevastopol relating to infrastructure in the transport, telecommunications, energy, oil, gas, and minerals sectors by:

  • granting any financial loan or credit, or establishment of a joint venture; or
  • acquiring or extending an interest in an enterprise.

These restrictions on commercial activities align with those implemented by the EU and the US in July and December 2014.

Import and export restrictions

The expanded sanctions ban the import of:

  • arms and related matériel from Russia; and
  • any goods from Crimea and Sevastopol that have not been examined and verified by Ukrainian authorities.

The sanctions prohibit the export to Russia of:

  • arms or related matériel, including the provision of any technical or financial services in relation to military activities or the manufacture, maintenance or use of arms or related matériel; and
  • goods and services relating to deep water, Arctic, or shale oil exploration or production projects in Russia.

The export to Crimea and Sevastopol of goods and services related to infrastructure in the transport, telecommunications, energy, oil, gas and minerals sectors is also banned by the sanctions.

Restrictions on services

These expanded sanctions extend to the provision of any technical or financial services related to the export or import of sanctioned goods or services, or any services that assist with engagement in any sanctioned commercial activity in Russia, Crimea or Sevastopol.

CONCLUSION

Australia's expanded sanctions will affect companies engaged in business in Russia, Crimea and Sevastopol, particularly those working in the energy and resources, financial services or defence matériel sectors.

Australian companies may apply for an authorisation from the Department of Foreign Affairs to meet any pre-existing legal obligation to engage in an activity subject to the new sanction laws.

Applications must be submitted within 90 days of the commencement of the new sanctions through DFAT's Online Sanctions Administration System.