NEW US SANCTIONS AGAINST RUSSIA SANCTIONS AGAINST RUSSIA. HOW IS SWEDISH TRADE WITH RUSSIA AFFECTED? What is new?

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1 NEW US SANCTIONS SANCTIONS AGAINST RUSSIA AGAINST RUSSIA HOW IS SWEDISH TRADE WITH RUSSIA AFFECTED? What is new? BUSINESS SWEDEN 2016

2 In August 2017, the US Congress has introduced new sanctions against Russia. From Swedish Business point of view the main point is sanctions against energy pipelines and to some extent the privatization of state assets. A large difference is also that the President will not be able to lift the sanctions by himself, which makes it even more unlikely that the sanctions will be lifted any time soon. Jonas Ökvist Deputy Country Manager Russia jonas.okvist@business-sweden.se

3 NEW US SANCTIONS AGAINST RUSSIA In 2014 EU and USA imposed coordinated sanctions on Russia. The main points in the sanctions were regarding financing of some banks and large corporations, an arms embargo, equipment for some oil drilling projects in Russia and goods and services for several sectors on Crimea. These American sanctions were imposed through executive orders by the President. The Congress of the United States has now introduced an act to intensify those sanctions and extend them to some additional areas. Energy pipelines Regarding the pipeline sanctions, the act instructs the President to impose ( may impose ) sanctions on entities that invests or provides goods, services, technology or information for the construction of Russian energy export pipelines for a value of more than USD or USD over a 12 month period. So the sanctions are not direct, it should rather be determined by the US President if sanctions should be imposed. It is also stated in article 232 that it should not be provided to the Russian Federation. It is not exactly clear how the Russian Federation should be interpreted, but since Gazprom is controlled and partly owned by the Russian state it can be assumed that it falls under that definition, otherwise no pipelines would be under sanction. In particular, the ongoing Nord Stream 2 and TurkStream are projects should be covered, since the pipelines are partly owned by Gazprom. Further, it is specified that construction, modernization and repair of pipelines is covered. This raises a question regarding the currently existing pipelines that are partly owned by Gazprom, but located within EU. Many pipelines in EU are partly owned by Gazprom, for example the Polish section of Yamal- Europe. Oil projects The previous sanctions regarding deep water, Arctic offshore and shale projects are increased. If the Russian ownership is at least 33% in such a project, it is forbidden to provide goods or services for United States persons (or persons located within US) to provide goods, services or technology, no matter where in the world the project is located. However, financial services are exempted.

4 Other areas In addition to the above, there a several points that are less likely to affect Swedish companies. E.g. transactions with defense or intelligence sectors of the Government of the Russian Federation, facilitating privatizations of state-owned assets in a manner that unjustly benefits officials of the Government, engaging in activities undermining cyber-security on behalf of the Government of the Russian Federation, are prohibited. The previous sanction against loans to some Russian banks with a maturity of more than 30 days is tightened to cover maturities above 14 days. Future The Congress also requires the Secretary of Treasury to create a report within 180 days, which among other things, identifies of the most significant senior foreign political figures and oligarchs in the Russian Federation, determined by their closeness to the Russian regime and their net worth and the report shall include any indices of corruption. It is of course likely that this report will generate a new discussion regarding adding more persons to the sanction list during This text describes the sanctions that the US has imposed against Russian Federation, as the current state in August 2017, but should not be seen as legal advice. For details regarding the implications for your company, contact Business Sweden in Russia. Sources: The Congress of United States of America, gazprom.ru Contact us: Jonas Ökvist Deputy Country Manager Russia jonas.okvist@business-sweden.se

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