Sanctions against Russia

The current Russia/Ukraine crisis and the reactions of the UK, the EU and the US will affect businesses worldwide. New and wider sanctions have been introduced with consequences for financial services like insurance providers.

Germany has already announced that it will stop the approval process of one of the biggest infrastructure projects in history, the Baltic pipeline Nordstream 2. In the short term, stock markets and oil price are reacting.

The EU Commission has announced a “sanction thunder storm” and the UK has frozen assets of five banks, along with the assets of three Russian billionaires, who will also be hit with UK travel bans.

The sanctions (the exact scope will probably still evolve and be determined depending on the developments and actions by Russia) cover a wide range of topics and areas, including financial and political sanctions against certain businesses and businesspeople closely connected to the Kremlin, specific sanctions to the Financial sector, including measures excluding Russian oil and gas companies from getting loans via US, UK or European banks. Also, these banks could be prohibited to buy Russian government bonds.

The initially discussed exclusion of Russia from the international payment system SWIFT seems to be off the table for now but in any case, payments for existing insurance contracts in case of a claim will have to be reviewed very diligently before executing a payment cross-border. Given the potential impact of an exclusion of Russia from SWIFT with immediate effects, this cannot be disregarded.

There are new sanctions imposed against certain banks and payment institutions liked to Russia, effectively prohibiting US-Dollar transactions as well as any payments routed through these banks will be impacted. Again, this is something insurers in particular need to be aware of and need to monitor as part of their pre-payment screening in order not to breach sanctions themselves. Another option is the prohibition of transactions in US dollars which might be brought in either internationally or by OFAC.

Last but not least there is likely to be a technology embargo covering certain electronic products like mobile phones, computers or even household electronics. This would impact the general public but also the defence and aeronautics industry. The US is even considering applying the same export controls to Russia which the US has previously implemented against Cuba, North Korea, Iran or Syria.

We will be following these developments closely and are well placed to advise on any sanction related questions.