Trading Thoughts Blog
Permanent link for A Summer of Sanctions: Things to Consider Before doing Business with Russia in 2022 on July 14, 2022
By: Natalie Bremmer
United States relations with Russia have never been the best, but Russian threats and advancements into Ukrainian territory have put extreme tensions on the minor singular ounce of stability that was once present.
In the following months, pre-to-current invasion, the U.S. worked tirelessly amongst themselves and in collaboration with other countries to impose a variety of sanctions on Russia in an effort to slow this ruthless attack.
Check out the timeline of events below to get up-to-date on what has been going on with Russia.
The first, most notable event in this timeline of sanctions started on February 21, 2022, where, within pro-Russian Donetskaya Narodnaya Respublika (DNR) and Luhanskaya Narodnaya Respublika (LNR) regions of Ukraine, new investments, trade, and financing from U.S. personnel to this region had been stopped; the reason being that there were Russian forces already in these areas and the Russian government kept spreading false information of Ukrainian aggression towards them.
- Freezing several Russian banks and rejecting any future transactions; VTB Banks and Public Joint Stock Company Sberbank of Russia to name a few
- Putting financial limitations on several Russian elites, oligarchs, and private entities
- Limitations or complete bans on roughly 24 Belarusian people and entities; most banks, defense, and security suppliers, and defense officials
- Restrictions on the export of semiconductors, computers, lasers, and other technologies to Russia
Two days later, on February 26, 2022, the United States, European Union, United Kingdom, Japan, Canada, France, Italy, and Germany all imposed a sanction removing select Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) program to limit their access to reserves. In addition to this, they also aimed to stop key Russian entities from getting citizenship in other countries to avoid already imposed sanctions.
March consisted of a flurry of several more sanctions. One of the most notable ones was banning the importation of Russian oil, coal, and liquified natural gas which was announced on March 8, 2022.
Other relevant sanctions included travel bans going into Russia, banning transactions between the different businesses within the defense, marine, aerospace, and electronics sectors in Russia and Belarus to United States entities, restricting more than 300 high-class and powerful Russian figures, and solidifying financial sanctions against Russia that were already put in place in addition to some new ones.
During this same month, the United States, European Union, United Kingdom, Japan, Canada, France, Italy, and Germany reconvened in two separate meetings to announce increased import tariffs on Russia, eliminating their World Trade Organization membership benefits, and denying them access to World Bank and International Monetary Fund (IMF) to eliminate their borrowing capabilities.
Sanctions introduced in April further separated Russia from the most profitable sectors within the U.S., including:
- Russian darknet and ransomware entities; Hydra and Garantex
- Alrosa, the largest Russian diamond mining company
- Banning Russian and Russian-affiliated vessels from entering U.S. waters
- Russian virtual currency mining companies; Transkapitalbank, Bitriver, Tsargrad, and more
- Temporary denial orders towards Russian aircraft carriers Aeroflot, Azur Air, and UTair for evading previous sanctions
However, one of the most notable events during this month was the two laws President Biden passed on April 8, 2022.
The first, named “Ending Importation of Russian Oil Act”, bans the importation of any energy-related products classified under Chapter 27 of the Harmonized Tariff Schedule from the Russian Federation. This law also strictly prohibits investments in anything that would aid Russia in the takeover of Ukraine.
It is, however, written into this law that the acting president would be able to lift this ban after 90 days of submitting a certification to Congress.
The second law, titled “Suspending Normal Trade Relations with Russia and Belarus Act”, removed both Russia and Belarus from the ‘Normal Trade Relations’ – Column 1 – of the Harmonized Trade Schedule and placed them in Column 2 with much higher rates than Normal Trade Relation countries.
The majority of the written portion of this law was explaining their reasoning for the column shift; essentially how the United States and Ukraine are both members of the World Trade Organization (WTO), how Russia was also part of the World Trade Organization at the beginning of the invasion, and then how not only did Russia’s invasion into Ukraine, denied Ukrainians of their right to independence and sovereignty but also continues to threaten international relations and hampers Ukraine’s ability to participate in the World Trade Organization. Since Belarus has been providing very public support to Russia during this time, they were also moved to Column 2.
On January 1, 2024, Russia and Belarus are scheduled to be reclassified under Column 1 and once again receive Normal Trade Relations treatment.
Similar to the first law, the president can submit a proclamation to move both Russia and Belarus back to Column 1 rates which would take place 90 days after the submission date and would last no longer than one year.
The passing of sanctions in May slowed significantly compared to March and April, but a few notable events took place regardless.
On May 8, 2022, the Leaders of The Group of Seven – United States, United Kingdom, Japan, Canada, France, Italy, and Germany – gathered in Berlin with the president of Ukraine and agreed on five more key elements to put into effect as new or improved sanctions to cripple the Russian war effort.
The biggest driving point was a permanent phasing out of dependence on Russian energy, including oil.
The other decrees included:
- continuing with sanctions against Russian banks
- banning the export of key services to Russia that could help with war efforts
- fight Russian propaganda by limiting the revenue private companies can transfer to Russia and their affiliates, and
- continue with sanctions against the extremely wealthy and all of their family members that support President Putin in this conflict
On May 9, 2022, more strict restrictions were added to existing sanctions (enacted on March 3, 2022) on American exported goods – mostly wood products and construction machinery – that were originally meant to slow down Russia’s oil production but were slightly repurposed to stop the replenishment of war materials.
On the same day, the tariffs on Ukrainian steel that were put in place by ex-President Trump were temporarily lifted for one year.
Closer to the end of the month, May 24, 2022, the U.S. Treasury blocks Russian entities from paying debts back to bondholders or, in more generous cases, increased interest by as much as 50% from their original totals.
June consisted mostly of fine-tuning sanctions that were already imposed in prior months.
June 2, 2022, was quite an eventful day– including adding 71 more entities to the sanction list which included mostly ‘military end-users,’ freezing more assets stored around the globe of wealthy and influential Russian individuals, and adding more export controls to limit items used for Russian military purposes, and further explaining U.S. export controls to allies with a readout by Deputy Secretary Don Graves in Belgium.
Later on June 15, 2022, the U.S. government targeted a Russian extremist group self-titled the Russian Imperial Movement (RIM), formerly classified as a terrorist group in April of 2020, and significantly limited their ability to move funds by sanctioning their two most prominent leaders.
The rest of that month consisted of more Temporary Denial Orders on airlines that continued to violate travel sanctions, addressing evasion attempts on Russian and Belarusian fronts to skirt around financial sanctions, and creating even stricter access to companies attempting to export military supplies and other technologies to Russia.
To learn more about the sanctions imposed on Russia and how that could affect your business, contact GVSU's Van Andel Global Trade Center and sign up for our 5th Annual Summer Summit taking place on August 3, 2022, at the GVSU Alumni House.
Natalie Bremmer is a Student Assistant at GVSU’s Van Andel Global Trade Center . She is a Junior currently pursuing undergraduate degrees in Finance and Human Resource Management at Grand Valley State University. She enjoys lifting weights, getting lost in a good video game, spending time with friends, and going on long hikes.