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Commodity traders, insurers and shipping groups are among western companies approaching lawyers for advice on how to restart trading with Russia, in preparation for a potential lifting of US sanctions on Moscow.
Many western companies appeared to write off their Russian business after the US and Europe responded to Vladimir Putin’s 2022 full-scale invasion of Ukraine with the most expansive sanctions regime in history. But US President Donald Trump’s pursuit of a rapprochement with Moscow has raised the once-unthinkable possibility that some restrictions could be relaxed.
In response, companies have been asking how they might structure their activities to allow them to restore trading with Russian entities, according to legal advisers, particularly if the US eases its sanctions on Moscow but EU and UK restrictions remain in place.
“The bifurcation of the US and Europe is a major issue for business at the moment,” said Sam Tate, global head of regulatory and investigations at law firm Clyde & Co. “Some companies are planning for this change and what it means for their business and what they can do to prepare for it,” he said.
Daniel Martin, a partner and sanctions specialist at HFW, said that historically, western companies had designed their sanctions policies to comply with US measures, which were almost always the most restrictive. Clients were now asking whether they needed to redesign those programmes to align in the first instance with Europe, given the more aggressive stance on Russia of the EU and the UK.
“It doesn’t seem likely to me that any sort of sanctions relief would involve all US sanctions being lifted straight away,” he said. “Right now it’s a question of, ‘let’s map out what’s in place at the moment and let’s make our best estimate of what might happen from a US perspective’.”
If US sanctions were eased, oil traders would probably seek to re-engage with Russia more quickly than oil producers, which would need to make bigger investments in order to restart activity, Martin said as an example. However, he cautioned that companies would need to weigh the risk that the US could ease sanctions and then reimpose them, if Putin was perceived to have reneged on any deal.
“There may well be traders who can see that there are lucrative commercial opportunities in re-engaging in this trade but if they can’t get their banks, insurers and carriers back on board then they may find that more difficult,” he said.
Many companies have financing agreements that require them to comply with all US, EU and UK sanctions, while insurers could also be reluctant to provide cover for businesses looking to re-engage with Russia.
Leigh Hansson, a partner in the global regulatory enforcement group at law firm Reed Smith, said most multinational companies would still be constrained by EU and UK sanctions even if the US started to ease restrictions on trading with Russian entities.
“Energy majors and those kinds of multinational companies are still going to have an EU or UK presence — it’s very difficult to find one that doesn’t — or they will employ EU or UK nationals, so they will be bound by the sanctions,” said Hansson.
Theoretically, European companies could seek to set up US units, staffed with non-Europeans, to take advantage of more permissive US rules, HFW’s Martin said. But that would be costly and only worthwhile if the commercial opportunity was perceived to be significant and long-term. “You would have to ringfence it from all UK, EU support — whether that’s legal, compliance, insurance, risk, finance,” he added.
Companies in Asia or the Middle East were more likely to take advantage of an easing of US sanctions by expanding already existing Russian business, according to Hansson. “The same companies that have been very aggressive in the past few years will continue to do so,” she said. “They might be emboldened by this. There is a lot of money to be made.”