Doing Business with Russia Under Sanctions: A Compliance Guide

Two legal regimes run at the same time

A transaction involving Russia is tested against two separate bodies of rules. The first is the sanctions regime of your home country or of the jurisdiction whose currency, bank or goods are involved. The second is Russian counter-measures, usually described as special economic measures, which operate on the Russian side of the deal and can block or delay completion even when your own regulator has no objection.

These two regimes are not symmetrical and do not cancel each other out. A transaction can be lawful under one and blocked under the other, and the failure usually shows up late: at the bank, at the registrar, or at the moment of closing. Experienced counsel therefore maps both regimes before commercial terms are agreed, not after.

Nothing in this article is a substitute for a written legal opinion. Sanctions lists, licensing practice and Russian counter-measure procedures change, and the only reliable source for your specific case is an adviser who can see the parties, the goods and the payment route.

• Map your home-country regime and the Russian counter-measure regime separately
• Identify which jurisdiction has a genuine nexus: currency, bank, goods, ownership, or personnel
• Assume both sets of rules will be applied by the bank even if your lawyer reads them differently

Can UK companies trade with Russia?

For a UK-incorporated company the answer depends on what is being traded, with whom, and through which banks. The UK maintains its own sanctions framework, administered by the Office of Financial Sanctions Implementation, with asset freezes on designated persons and restrictions covering defined sectors, goods and services. Some activity is prohibited outright, some is permitted only under a specific licence, and some falls outside the restrictions entirely.

In practice the harder constraint is often commercial rather than legal. UK banks and insurers apply their own risk appetite, which is usually narrower than the letter of the rules. A transaction that would be licensable can still be unfinanceable if no UK bank will process the payment or issue the letter of credit.

The same logic applies with variations across the EU, the US and other jurisdictions. A UK parent with an EU subsidiary, a US dollar payment leg, or a Turkish distributor can pull three different regimes into the same deal. A single home-country opinion is rarely enough; you need to know which regimes touch the transaction and who signs off on each.

• Check whether the specific goods or services are restricted, not just the counterparty
• Check the ownership chain of the counterparty, not only its name on a list
• Ask your bank in writing whether it will process the payment before you sign anything

Special economic measures: the Russian-side rules

Russia's counter-measures are introduced by presidential decree and implemented by government and Central Bank decisions. They typically operate through a small number of mechanisms: prior approval by a government commission for certain transactions, mandatory use of special bank accounts for payments connected to identified persons, restrictions on transferring shares or exiting a Russian company, and rules on how dividends and debt payments can be moved.

For a foreign investor the two moments that matter most are entry and exit. Entry can require approval if the counterparty or the sector is caught. Exit - selling a Russian subsidiary, transferring shares to a foreign buyer, or repatriating proceeds - is where the process is most structured and most likely to require a formal application, a valuation and a waiting period.

The list of persons and the procedural thresholds are amended regularly, and individual decrees can be adopted quickly. Treat any procedural summary, including this one, as a map rather than a rulebook, and confirm the current position with a Russian-qualified adviser at the point of transaction.

• Prior approval by a government commission is common for transactions involving investors from countries designated unfriendly
• Special account regimes can govern how dividends, coupons and sale proceeds are credited and used
• Exit approvals typically require valuation, an application and a defined waiting period

Payments and settlement: where deals actually break

Settlement has become the binding constraint. According to the Bank of Russia, 86% of Russian exports were settled in rubles and friendly-country currencies in 2025, up sharply from earlier years. That shift means a deal that looks straightforward on paper may have no correspondent chain willing to carry the payment in your currency.

The workable approach is to design the payment route first: which bank on each side, in which currency, through which correspondent, with which documentation package, and what happens if the receiving bank declines mid-transaction. Retail infrastructure inside Russia is largely digital - 88% of retail payments were cashless in 2025 - but corporate cross-border flows are a different matter and depend heavily on the specific banks involved.

Build in flexibility. Where a single-currency route is fragile, contracts sometimes provide for alternative currencies, alternative paying entities, or escrow through a third-country bank. Each of these has its own compliance consequences, so the structure should be reviewed as a whole rather than patched at the last minute.

• Confirm the correspondent chain in writing before signing
• Agree in the contract what happens if a bank declines or delays a payment
• Expect documentation and compliance review at each bank in the chain, not just the first

Choosing the legal form and entry point

Most foreign investors enter through a limited liability company, which is the standard operating vehicle, or through a joint stock company where share structure matters. Alternatively, a holding company can be placed in one of Russia's special administrative regions, which had 674 companies registered as of 2025 according to the Ministry of Economic Development. These regions offer a specific corporate and tax framework, and the detail changes.

For smaller or portfolio-style exposure, regulated investment platforms are an alternative to direct equity. The Bank of Russia reported 106 licensed investment platforms as of May 2026. Larger industrial projects often use special investment contracts, which the government counted at 90 contracts with more than ₽2 trillion of declared investment in 2025. A 25% corporate profit tax applies in the general case, with 0-5% available in special regimes, and standard VAT has been 22% since 1 January 2026 - but eligibility conditions are specific and should be verified.

Sector matters enormously. Investment in strategic sectors requires prior approval under Law 57-FZ, and the definition of strategic activity is broad. Foreign ownership of agricultural land is not permitted; lease terms run up to 49 years. Certain border areas, including Sochi, Anapa, Gelendzhik and Novorossiysk, are closed to foreign land ownership. Investors from countries designated unfriendly also face special account regimes and additional government approvals.

• Limited liability company: the default operating vehicle for most foreign investors
• Special administrative regions: holding-company framework with 674 companies registered as of 2025
• Special investment contracts: 90 contracts and over ₽2 trillion declared, Government of Russia, 2025
• Strategic sectors: approval required under Law 57-FZ
• Agricultural land: lease only, up to 49 years; no foreign ownership
• Closed border areas for foreign land ownership include Sochi, Anapa, Gelendzhik and Novorossiysk

A practical pre-deal screening sequence

The sequence below is the order in which experienced teams usually work. It is not a legal test, but it prevents the most common and most expensive mistake: discovering a blocking issue after the signing.

• Step 1 - Party mapping: build the full ownership chain of the counterparty, including parent companies, beneficial owners and any party holding more than a small stake
• Step 2 - Regime mapping: identify every jurisdiction with a nexus to the deal, then check each one's lists and restrictions
• Step 3 - Goods and services check: classify what is being supplied, including dual-use and technical items, and check whether it is restricted, licensable or free
• Step 4 - Sector check: confirm whether the activity falls under Law 57-FZ or another prior-approval regime
• Step 5 - Payment design: name the banks, currencies and correspondents, and get written confirmation they will handle the flow
• Step 6 - Russian-side procedure: establish whether approval by a government commission or a special account regime applies
• Step 7 - Documentation: assemble the screening file, legal opinions and correspondence in one place, and keep it current for the life of the deal

Where deals most often fail

Most failures are procedural rather than commercial. The deal is sound, the price is agreed, and then a step that was assumed to be administrative turns out to require an approval nobody applied for.

The recurring problems are predictable: an ownership chain that reveals a designated party two levels up; a payment route that works in testing and fails at scale; an exit that requires a commission decision and months of waiting; a special account that determines when and how proceeds can be used; and documentation that was adequate at signing but not updated when the rules changed. Budget time and cost for each of these, and treat regulatory timing as part of the project schedule rather than an external risk.

• Undeclared beneficial owners appearing late in due diligence
• Bank de-risking after terms are agreed
• Exit and repatriation approvals treated as formalities
• Assumptions about special account mechanics that turn out to be wrong
• Compliance files not refreshed as lists and procedures change

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