Expanded global export controls enforced on Russia, following its invasion of Ukraine

The European Union (EU), the United States (US), United Kingdom (UK), and others, have imposed stringent restrictions on exports to Russia, following its invasion of Ukraine. These new controls are intended to affect significant sectors of Russia's economy, such as energy, aviation, aerospace and technology. Given the 2014 sanctions enforced on Russia's oil and gas exploration industry, as a result of the Crimea invasion, has not deterred from further aggression towards Ukraine; it is likely that there will be incremental sanctions and controls enforced on Russia depending on the changing severity of the situation. Below is a summary of the expanded export controls enforced by the EU, US and UK.

European Union

On 25 February 2022, the EU extended the Russian sanctions enforced in 2014 following the annexation of Crimea to include specific dual-use and military items that would prohibit the proliferation of Russia's economy through its various key industries. The new restrictions limit any counterparty in the European Union from selling, supplying, transporting or exporting any items relating to these industries to an entity or individual in Russia, or for use in Russia, although there are limited exemptions for those working in humanitarian aid and medicine. The new export controls listed under Annex VI in EU Regulation 2022/328, detail specific goods that are restricted for export to Russia. They include:

• Electronic devices including microprocessor microcircuits and surface skimming acoustic wave devices, restricted for their potential use in radar and sonar devices
• Sensors and lasers including direct view imaging equipment and semiconductor lasers, restricted for their potential use in surveillance equipment and guided weapons
• Avionics including inertial navigation systems, restricted for their potential use in military aircraft
• Marine equipment including photographic still cameras and stroboscopic light systems restricted for their potential use in underwater vessels to scan sea-mines and track other vessels
• Aerospace and propulsion equipment including off-highway wheel tractors, restricted for their potential use in carrying heavy duty machinery and spacecraft parts

The emphasis on avionics, aerospace and technological goods being restricted for export to Russia is intended to cripple the country's ability to manufacture goods that will facilitate it's war effort in Ukraine, as well as it's longstanding production of goods that are then re-exported to other countries.

US export controls on Russia

On 24 February 2022, the US Bureau of Industry and Security (BIS) expanded its existing export controls on Russia, limiting US companies from exporting dual-use and military goods to Russia. Controlled items in the US Commerce Control List under categories 3-9 (electronics, computers, telecommunications, sensors and lasers, avionics, marine, aerospace and propulsion), were restricted for export, transshipment, or re-export to Russia. In addition to adding further restrictions on goods, the US also confined the license requirements for export control by creating two 'foreign direct product' (FDP) rules. As part of the new rules the US again stressed all parties throughout the supply chain would be responsible for the goods; first to understand if Russia is the end-destination of the goods, or whether the goods will be transiting through Russia, and secondly to understand the end-use and end-user of the goods, and whether there is a potential military application to the goods.

The US BIS also emphasized controls on exporting sensitive goods to Donetsk and Luhansk, current warzone regions in Ukraine. These new restrictions and the complexity of obtaining specific licenses are expected to effectively negate companies from exporting goods to Russia.

UK export controls on Russia

On 1 March 2022, the UK's Export Control Joint Unit announced there would be further controls enforced on Russia, in relation to critical-industry goods, dual-use goods and military goods. The critical-industry goods subject to export control aligned with those listed in the EU regulation including equipment and components used in electronics, telecommunications and aerospace. In addition, the UK Prime Minister confirmed all dual-use items listed under the UK Strategic Export Control List would be banned from export to Russia; with an aim to constrain Russia's military, industrial and technological capabilities. In contrast to the EU and US who stated exporters must acknowledge the true intention and state of the end-user of the restricted goods; the UK confirmed a ban on exports of dual-use and military items irrespective of end-user.

Import restrictions from Russia

In order to cut Russia off from the rest of the world for its actions against Ukraine, several states are also implementing strict import restrictions from Russia. One of Russia's largest exports is oil and gas, which certain countries will either completely stop importing, such as the US, or will begin to wind down, such as countries in the EU and the UK. Incremental steps to limit Russia from sustaining their economy have begun, including the exclusion of airspace for Russian aircraft, and also a ban on any sea-going vessels connected to Russia entering UK and EU ports. The intended outcome is that global enforced sanctions and trade controls will discourage Russia from continuing its war on neighbouring Ukraine.

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Posted 14 March 2022 by Ravi Amin, Trade Compliance Subject Matter Expert, Maritime & Trade, IHS Markit

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.