More Sectoral Sanctions on Russia Expected, Say Trade Lawyers
More sectoral sanctions targeting vulnerable elements of the Russian economy that rely on imports, such as semiconductors and other high-tech products, appear likely, said trade lawyers on a Feb. 23 panel hosted by law firm Thompson Hine. Following President Joe Biden's executive order and statements imposing sanctions on Russia (see 2202220003), they agreed, "the [U.S.] government is holding more in its back pocket" following the first tranche of sanctions announced on Feb. 21 and 22.
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Although more financial sanctions are likely in the near future, for companies already doing business in Russia there likely won't be much of a difference due those already in place since 2014, they said. Francesca Guerrero, Thompson Hine partner, predicted that the "next round" of sanctions will likely have specific export controls, likely on semiconductors. She said that the U.S. is strongly signaling that it will impose export controls on high-tech sectors, including extending the foreign direct product rule (see 2202180026) for semiconductors made outside the U.S. This move would, in turn, impact a variety of high-tech sectors in Russia, such as medical devices, of which Russia is a major importer.
Brian Mulier, a Bird & Bird partner, said that the U.S. may take cues from the European Union's existing export control regime on dual-use technology. He also predicted that, in addition to high-tech sectors, equipment used in oil and gas exploration may be targeted for export controls. In anticipation of those controls, panelists cautioned, companies should investigate partners in Ukraine and include "sanctions clauses" when their goods could end up in Russia or the two regions of Ukraine that Russia has recognized as breakaway republics, Donetsk and Luhansk. The panel advised companies with partners in eastern and southern Ukraine to examine those relationships and assess how operations might be impacted if the restrictions expand.