As the situation in the Ukraine continues to deteriorate, all eyes are focused on how governments around the world will react. While the primary focus is of course on the unfolding political and humanitarian developments, those commercial organisations with trading links to the Ukraine should be aware that the situation could impact on their operations in the country, depending on how it develops.

In this Briefing, we look at the issue of sanctions against Ukraine, but it is important to keep in mind that there are a host of wider issues, including the possibility of sanctions against Russia, unsafe port issues and frustration of contracts. Needless to say, the situation is highly fluid and liable to change suddenly. In particular, there is continued debate as to whether the US and EU will impose some form of economic sanctions against Russia, and there is due to be an emergency summit of EU leaders to discuss Ukraine, in Brussels on Thursday.

The US, EU, Switzerland, Canada and others have already talked about imposing sanctions against certain individuals in the Ukraine. These restrictions would freeze the assets of those individuals and make it an offence to make funds or economic resources available directly or indirectly to or for the benefit of a sanctioned individual. Because indirect payments are prohibited, the ban affects payments via third parties, meaning that detailed due diligence would be required before payments are made to any Ukrainian organisation, to check that it is not owned or controlled or acting on behalf of a sanctioned individual.

While the EU and US lists of sanctioned individuals have not yet been published (although it is reported that Austria has already frozen certain accounts and Switzerland has already published an Ordonnance freezing the funds of 20 individuals), companies should be considering whether the nature of their counterparties means that they are exposed to an increased risk that the company, its directors or shareholders might be included on the list of sanctioned entities.

The restrictions which have been discussed so far have been limited to an asset freeze and a travel ban - in each case directed at named individuals. However, it is possible that further restrictions might be imposed, potentially with very little, if any, advance notice. Please note that those individuals or entities who support listed asset freeze targets can themselves be listed as asset freeze targets without notice.

Sanctions are likely to be targeted at named individuals, rather than more broadly against trade with Ukraine, whose new government appears to have the support of the EU and the US. However, historic sanctions programmes, such as those against Côte d'Ivoire, Egypt, Libya, Iran and Syria indicate that an asset freeze could extend to include organisations which provide financial, commercial or military support to sanctions targets.

In the case of sanctions against Côte d'Ivoire and Libya, port authorities were included as sanctions targets, making it impossible to move cargo through those ports. Likewise, in the case of Iran, the inclusion of port operators such as Tidewater Middle East Co on sanctions lists makes it very difficult to trade with Iran (which is, of course, the purpose of the sanctions programme).

If increased sanctions are imposed in response to events on the ground, the EU and US may consider bans on the import and export of certain items to and from Ukraine(or specific parts of the country). While the primary focus of any such measures is likely to be on military and quasi-military items (such as equipment for internal repression), we have seen bans in other sanctions programmes on purely commercial items.

For example, in the case of sanctions against Myanmar (formerly Burma) there was a focus on the extractive industries, with bans on the supply to Myanmar of logging and mining equipment and bans on the export from Myanmar of timber, coal, metals and precious stones. Likewise, in the case of Iran, the EU and US have focused on Iran's oil and gas sector, with wide-ranging bans relating to crude oil, petroleum products and petrochemicals (some of these have recently been partially suspended, subject to strict conditions).

As well as restrictions which impact directly on commercial enterprises, we have also seen restrictions which have an indirect impact, by restricting the ability of banks and insurers to provide the normal support which is critical to international commerce. For example, it is prohibited to provide insurance to Iranian commercial organisations, and US banks are unable to clear US Dollar payments relating to trade with Iran.

If extra-territorial measures are imposed (in the way that the US has imposed measures in respect of Iran) then companies will have to be aware not only of the domestic measures which apply to them, but also restrictions imposed from further afield.

As highlighted by this high level overview of possible restrictions, sanctions programmes can create a complex patchwork of overlapping restrictions, sometimes at very short notice. Any commercial organisations which have business interests in Ukraine need to ensure they are up to date with the developing legal landscape. In addition, much will depend on the attitude of banks and insurers and it is important for commercial organisations to work closely with their banks and insurers, to ensure a consistent approach.