Russian Sanctions Law: Countersanctions, Import Substitution, and Parallel Imports

Russian sanctions law encompasses both the measures imposed on Russia by other states (primarily the United States, the European Union, the United Kingdom, and other allied states) and the countersanctions adopted by Russia in response. The Russian legal framework on sanctions has evolved rapidly since 2014 and underwent a fundamental transformation following the 2022 sanctions escalation. Russian countersanctions law includes trade embargoes, import substitution requirements, the legalisation of parallel imports, restrictions on foreign transactions, and criminal liability for compliance with foreign sanctions.

The Food Embargo (2014)

Presidential Decree No. 560 of 6 August 2014 (O primenenii otdelnykh spetsialnykh ekonomicheskikh mer v tselyakh obespecheniya bezopasnosti Rossiyskoy Federatsii) introduced a ban on the import of agricultural products, raw materials, and foodstuffs from countries that had imposed sanctions on Russia. The embargo initially covered the United States, the European Union, Canada, Australia, and Norway, and was subsequently extended to other countries. The prohibited products include meat and dairy products, fish, vegetables, fruits, nuts, and processed food products. The embargo is renewable annually and has been extended and adjusted in scope. The food embargo was the first major Russian countersanction and was justified as a national security measure to protect the Russian food market and to reduce dependence on imported food. The embargo has contributed to the growth of domestic agricultural production (import substitution), though it has also contributed to food price inflation and reduced consumer choice.

Import Substitution Policy

The import substitution (importozameshcheniye) policy, developed from 2014, aims to reduce Russia’s dependence on imported goods and technologies across strategic sectors, including agriculture, manufacturing, defence, energy, information technology, and pharmaceuticals. The policy is implemented through a combination of regulatory measures (including the prohibition on the procurement of foreign goods by state and municipal entities where domestic alternatives are available), financial support for domestic producers (subsidies, tax incentives, preferential loans), and technical regulation (including the establishment of national standards and certification requirements). The import substitution policy has been most successful in agriculture, where Russia has become a net exporter of grain and has significantly reduced imports of meat and dairy products. The policy has been less successful in high-technology sectors, where domestic alternatives to imported equipment, components, and software are often unavailable or inferior.

Parallel Imports Legalisation (2022)

The legalisation of parallel imports (parallelny import) in 2022 was one of the most significant changes in Russian trade law. Parallel imports are the importation of genuine goods into Russia without the authorisation of the intellectual property right holder. Under the principle of exhaustion of intellectual property rights, Russian law previously applied the national exhaustion principle (the right holder’s consent is required for parallel imports). The Ministry of Industry and Trade, by Order No. 1532 of 29 March 2022, approved a list of goods for which parallel imports are permitted, including electronic equipment, vehicles, machinery, medical devices, consumer goods, and other categories significantly affected by the withdrawal of foreign companies. The legalisation of parallel imports was justified as a response to the sanctions-related restrictions on the supply of goods to Russia and to the withdrawal of foreign companies from the Russian market. The parallel imports regime does not apply to all goods; only those goods included in the approved list may be imported in parallel. The regime has been extended and adjusted as the sanctions situation has evolved.

Restrictions on Foreign Transactions

The Russian government has imposed a range of restrictions on foreign transactions in response to sanctions. These include: restrictions on the payment of dividends, interest, and other income to persons from unfriendly states (Resolution No. 295 of 6 March 2022); restrictions on the execution of share purchase and sale transactions with persons from unfriendly states (Resolution No. 302 of 7 March 2022, requiring approval by the Government Commission on Control over Foreign Investments); restrictions on the export of foreign currency (Presidential Decree No. 81 of 1 March 2022); restrictions on the transfer of funds abroad; and the introduction of mandatory ruble payment mechanisms for gas exports to unfriendly states (Presidential Decree No. 172 of 31 March 2022). The restrictions are enforced by the Central Bank, the Ministry of Finance, and the Federal Service for Financial Monitoring (Rosfinmonitoring).

Sanctions Compliance and Criminal Liability

Russian law imposes criminal and administrative liability for compliance with foreign sanctions that harm Russian interests. Article 284.3 of the Criminal Code, introduced by Federal Law No. 32-FZ of 4 March 2022, criminalises the implementation of decisions of foreign states or international organisations regarding the introduction of restrictive measures (sanktsii) against Russian citizens or legal entities. The provision applies to acts committed in the performance of obligations arising from treaties or transactions and resulting in the failure to perform obligations to Russian citizens or legal entities. The penalty is up to ten years’ imprisonment for acts causing large-scale damage or resulting in the suspension of an organisation’s activities. Article 284.2, introduced by the same law, criminalises public calls for the introduction of sanctions against Russia (fines of up to 500,000 rubles or imprisonment up to three years). The administrative liability for compliance with foreign sanctions is established by Article 14.61 of the KoAP RF. The sanctions compliance provisions have created significant legal risks for foreign companies operating in Russia and for Russian companies with international operations, who must navigate between the requirements of foreign sanctions laws and the prohibition on compliance with such sanctions under Russian law.

The List of Unfriendly States

The Russian government has established a list of unfriendly states (nedruzhestvennyye gosudarstva), originally adopted by Resolution No. 430-r of 5 March 2022 and subsequently amended. The list includes states that have imposed sanctions against Russia, Russian citizens, or Russian legal entities. As of 2024, the list includes the United States, the member states of the European Union, the United Kingdom, Canada, Australia, Japan, South Korea, Switzerland, Norway, and other states. The designation of a state as unfriendly triggers the application of various restrictive measures, including: restrictions on payments to persons from unfriendly states; restrictions on transactions with persons from unfriendly states; counter-sanctions (the food embargo and other trade restrictions); visa restrictions; and enhanced regulatory oversight. The concept of unfriendly states is not based on international law but is a unilateral designation that serves as the basis for the application of Russian countersanctions.

The Government Commission on Foreign Investments

The Government Commission on Control over Foreign Investments in the Russian Federation exercises significant powers in the sanctions context. The Commission reviews and approves transactions involving shares in Russian entities that have strategic significance, transactions involving the withdrawal of foreign investors from Russian assets, and transactions involving persons from unfriendly states. The Commission’s approval is required for a wide range of transactions, and the Commission may impose conditions on such transactions (including requirements relating to the price, the transfer of assets, and the retention of employees). The Commission operates under the Resolution of the Government of the Russian Federation and publishes its decisions selectively. The Commission’s role has been central to the management of the exit of foreign investors from the Russian market.

Significance

Russian sanctions law has developed from a limited set of countersanctions (the 2014 food embargo) into a comprehensive legal framework for managing the impact of international sanctions and for imposing countersanctions on unfriendly states. The legalisation of parallel imports, the restrictions on foreign transactions, and the criminalisation of compliance with foreign sanctions represent significant departures from the pre-2022 legal regime. Russian sanctions law is in a continuous state of evolution, with new measures adopted in response to the sanctions imposed by foreign states and in anticipation of further restrictions. The complexity of the legal framework and the legal uncertainty created by the interaction of foreign sanctions and Russian countersanctions present significant challenges for businesses and legal practitioners operating in or with Russia.