Response to US sanctions – Russia may take moderate approach
Russia’s response to the latest US sanctions is still in the process of being formed. However, the Russian state now seems to be refraining from extreme measures such as the earlier proposed introduction of criminal liability for sanctions compliance (please see our newsletter of 21 May 2018). A more moderate approach is suggested by the recent counter-measures:
(1) considerations by the State Duma to introduce administrative liability for sanctions compliance instead of criminal liability;
(2) the entering into force of a framework law for counter-measures against the United States and other “unfriendly states”;
(3) the increase of import customs duties for certain goods originating from the United States to counter increased US tariffs; and
(4) the extension of the 2014 import ban for agricultural products from the United States and the European Union.
1. Ongoing consideration of blocking legislation
The draft blocking law which was adopted on its first reading by the State Duma on 15 May 2018 proposed criminal liability of up to four years’ imprisonment for individuals who comply with foreign sanctions and thereby restrict the ordinary business operations of Russian persons. In addition, it proposed that deliberate actions by Russian citizens which facilitate the introduction of foreign sanctions shall be punishable by up to three years’ imprisonment.
While criminal liability for the facilitation of the introduction of foreign sanctions will likely become law, the initiative to introduce criminal liability for compliance with the sanctions seems to have lost support. In particular, the Russian President stated that Russia will not punish foreign partners for complying with anti-Russia sanctions – this question had been decided. Also the State Duma no longer seems to be pushing criminal liability and is now considering only the less severe form of administrative liability for sanctions compliance. To date however, no draft law for such an administrative liability has been presented. These developments indicate that any upcoming liability for sanctions compliance will likely be significantly less severe than initially proposed.
2. New framework law for counter-measures
The Federal Law No. 127-FZ “On measures (counter-measures) in response to unfriendly actions of the United States […]” entered into force on 4 June 2018. This law constitutes another basis for the Russian President to take extensive economic counter-measures against the United States and other “unfriendly states” supporting the anti-Russia sanctions. In contrast to measures according to the Federal Law No. 281-FZ “On special economic measures” of 30 December 2006 (please see item 4 below), counter-measures under this law can be unlimited in time. Import bans can be imposed for any goods originating from unfriendly states or produced by companies incorporated in these states, except for goods which are lifesaving and have no equivalent produced in Russia.
The taking of any counter-measures is still at the sole discretion of the Russian President. However, counter-measures under this law have to date neither been taken nor proposed.
3. Increase of import duties on certain US goods
Governmental Order No. 788 of 6 July 2018 increased the import customs duties for certain types of goods originating from the United States to rates ranging from 25% to 40%. These types of goods include means of transport for the carriage of goods, road construction machinery, oil and gas equipment, metal processing and rock-drilling equipment as well as optical fibre. The new import customs duties will apply from 6 August 2018.
This measure is intended to counter the increase of US import tariffs on steel (to 25%) and aluminium (to 10%) originating from Russia and other states, which has already been in effect since 23 March 2018. It is therefore not a counter-measure under the new framework law (please see item 2 above), but a measure based on the principles of the World Trade Organisation (WTO), the Treaty on the Eurasian Customs Union and Federal Law No. 164-FZ “On the fundamentals of state regulation of foreign trade activity”.
4. Extension of import ban for agricultural products
Based on Presidential Decree No. 420 of 12 July 2018 and Governmental Order No. 816 of the same date, the import ban for agricultural products, raw materials and food from the United States, Member States of the European Union and other states supporting the anti-Russia sanctions has been extended for the time period from 1 January to 31 December 2019.
This import ban was initially imposed on 7 August 2014 for one year and has since then been regularly extended. It is based on Federal Law No. 281-FZ “On special economic measures” of 30 December 2006 which authorises the Russian President to take temporary measures to respond to unfriendly actions of foreign states which threaten the interests of the Russian Federation.