The Russian military’s recent invasion of Ukraine, and the related sanctions against Russia have many companies asking: how does this chaos impact our workforces in those countries? This broad question is answered below, with the caveat that these answers are subject to change, given the very fluid nature of the situation.
As fighting between Russian and Ukrainian forces continues, the United States, United Kingdom, European Union, and a host of other jurisdictions have imposed sanctions against certain Russian corporate entities and individuals, as well as against the Russian state as a whole. Thousands of global employers, especially those with operations in Russia and Ukraine, are bracing for the inevitable economic impact, as workforces and supply chains are disrupted, just as the region was starting to recover from the crippling effect of the COVID-19 pandemic. Indeed, it appears that the sanctions have already bitten into the Russian economy, with the S&P lowering its credit rating to “junk” status.
What are the sanctions imposed?
- U.S. Sanctions
Financial institutions: The U.S. Department of the Treasury has targeted the “core infrastructure” of Russia’s financial system, sanctioning multiple financial institutions, including Sberbank, VTB Bank, and their subsidiaries.1 The sanctions against VTB Bank (Russia’s second-largest financial institution) and three other Russian financial institutions freeze any of these entities’ assets touching the U.S. financial system (as well as the assets of any entity owned 50% or more by the sanctioned institutions) and prohibit U.S. persons from dealing with them. The sanctions against Sberbank, Russia’s largest financial institution, effectively cut off Sberbank’s ability to conduct transactions in the U.S. dollar. The United States is also taking measures to freeze Russian Central Bank transactions and prohibit the bank from deploying its international reserves.
By Lavanga Wijekoon, Stephan Swinkels, Elizabeth Lalik, Raoul Parekh, Darren Isaacs, and Uliana Kozeychuk via Littler