The sanctions imposed by EU Member States against Russia, in response to the on-going crisis in Ukraine, have had a significant impact on the Austrian economy.
Until now, Russia was the tenth most important business partner for Austria. In 2013, Austrian companies exported an aggregate of 3.5 billion Euros of products to Russia and imports reached 3.2 billion Euros. Russia had also become an increasingly important destination for Austrian direct investments.
The sanctions have particularly affected Austrian banks, who remain concerned about the possible commercial risks should Russia decide impose sanctions against the financial sectors of EU Member States, either in the form of extraordinary taxations, restrictions to capital movement or even expropriation.
Aside from Russia being an important market for Austrian credit institutions, companies from numerous other industries who have business relationships with Russia are also affected by the imposed sanctions. These companies must be alert to assessing the legal consequences of potential transactions or business ties with the blacklisted parties.
Difficulties may occur even in cases where Austrian companies conduct business with EU Member State companies, if these companies are subsidiaries of Russian entities and subsequently channel the received monies to a blacklisted Russian company. Such indirect circumvention of the sanctions results in the contractual arrangement with the EU subsidiary being null and void.
Furthermore, any person providing finance has to produce evidence to the contrary if there is a suspicion of non-compliance with the sanctions. It is recommended that companies properly document any step taken in the course of its engagement in a business transaction potentially subject to the sanctions as a precaution. Despite the imposition of penalties for violation of the sanctions, most companies are more concerned of losing their good reputation. Therefore many Austrian companies became hesitant to engage in business relationships with Russia.
It is likely that the EU sanctions and any Russian countermeasures will cost the Austrian economy in the region of 750 million Euros. With this in mind, the Austrian government recently adopted a crisis package, including support for small and medium sized enterprises (“SMEs”) when penetrating new markets abroad, as well as issuing guarantees for companies facing financial problems. This is aimed at financing SME engagements with customers in new markets to substitute for any lost opportunities in Russia.