International Trade & Sanctions in Russia

International trade involving Russia sits at the intersection of multiple overlapping legal regimes: domestic Russian customs and currency law, extraterritorial export control frameworks administered by third-country authorities, and anti-corruption statutes with global reach such as the U.S. Foreign Corrupt Practices Act (FCPA). For any business with a Russian nexus - whether as a buyer, seller, intermediary, or investor - the compliance burden is substantial and the cost of error is high. Fines, asset freezes, debarment from public procurement, and criminal liability are all live risks. This article maps the legal landscape, identifies the most common failure points, and explains how to structure a defensible compliance posture across customs, export controls, anti-corruption, and dispute resolution.

Russian international trade law rests on several interlocking statutes. Federal Law No. 164-FZ 'On the Fundamentals of State Regulation of Foreign Trade Activity' (Article 2 and onwards) defines the scope of state authority over imports, exports, and trade in services. The Customs Code of the Eurasian Economic Union (EAEU Customs Code), which replaced the earlier Russian Customs Code, governs the movement of goods across EAEU borders and applies directly in Russia. Federal Law No. 173-FZ 'On Currency Regulation and Currency Control' imposes obligations on Russian residents engaged in cross-border settlements, including mandatory repatriation of foreign currency proceeds under Article 19.

Alongside these domestic instruments, Russia is a signatory to numerous bilateral investment treaties and is bound by WTO commitments following its accession. The Federal Law No. 183-FZ 'On Export Control' establishes a licensing regime for dual-use goods, military equipment, and sensitive technologies. The Federal Customs Service (FCS) and the Federal Service for Technical and Export Control (FSTEC) are the two principal enforcement bodies for customs and export control matters respectively.

For foreign companies, the extraterritorial dimension is equally important. The U.S. Export Administration Regulations (EAR), administered by the Bureau of Industry and Security (BIS), apply to any transaction involving U.S.-origin goods, software, or technology - regardless of where that transaction occurs. The EU Dual-Use Regulation (EU) 2021/821 operates similarly within European supply chains. A non-U.S. company that re-exports U.S.-origin components to a Russian end-user without the required BIS licence faces denial orders, fines, and potential criminal referral.

In practice, it is important to consider that Russian domestic law and extraterritorial foreign law can pull in opposite directions. A Russian entity may be legally required under Russian currency law to complete a transaction, while a foreign counterparty faces prohibitions under its home jurisdiction's export control or sanctions rules. This tension is not theoretical - it arises regularly in long-term supply contracts and project finance structures.

Export control compliance in Russia-related trade requires mapping every product against two parallel classification systems: the Russian export control list under Federal Law No. 183-FZ and the relevant foreign control list (EAR Commerce Control List, EU Annex I to Regulation 2021/821, or equivalent).

The Russian system requires exporters of controlled items to obtain licences from the Federal Service for Technical and Export Control (FSTEC) or, for certain military goods, from the Federal Service for Military-Technical Cooperation (FSMTC). Licence applications must include end-user certificates, technical specifications, and in some cases independent expert assessments. Processing times vary but typically run between 30 and 90 days for standard dual-use items.

Under the EAR, the key question for any Russia-related transaction is whether the item has an Export Control Classification Number (ECCN) that triggers a licence requirement for Russia, or whether it falls under the EAR99 category. Since the expansion of BIS restrictions, a significant number of items that previously moved under licence exceptions now require individual licences - and many licence applications for Russia are reviewed under a policy of denial. Foreign Direct Product Rules (FDPR) extend U.S. jurisdiction to foreign-made products that are the direct product of U.S. technology or software, dramatically widening the scope of items subject to EAR controls.

A common mistake made by international clients is assuming that because a product is manufactured outside the United States, U.S. export controls do not apply. The FDPR means that a semiconductor fabricated in Taiwan using U.S. equipment and U.S. electronic design automation software may be subject to EAR controls when exported to Russia. Supply chain due diligence must therefore trace not just the physical origin of goods but the technology lineage of the manufacturing process.

Practical scenarios illustrate the range of exposure:

• A European machinery manufacturer sells industrial equipment to a Russian distributor. The equipment contains U.S.-origin microcontrollers. Without a BIS licence or applicable exception, the transaction may violate the EAR, exposing the European company to denial orders and reputational damage.
• A Russian trading company imports components classified as dual-use under Federal Law No. 183-FZ without obtaining the required FSTEC licence, believing the items are purely commercial. FCS detects the shipment at customs and initiates an administrative proceeding under the Russian Code of Administrative Offences (Article 14.20).
• A logistics provider routes a shipment through a third country to obscure the Russian end-destination. Both the shipper and the logistics provider face potential criminal liability under the EAR for wilful violations, which carry penalties of up to USD 1 million per violation and imprisonment.

To receive a checklist on export control compliance for Russia-related transactions, send a request to info@vlolawfirm.com.

Russian customs law under the EAEU Customs Code requires importers and exporters to declare goods accurately, classify them under the correct Commodity Nomenclature of Foreign Economic Activity (TN VED) code, and pay applicable duties and taxes. Misclassification - whether deliberate or inadvertent - is one of the most frequent grounds for customs disputes and administrative penalties.

The Federal Customs Service has broad authority to conduct post-clearance audits under Article 331 of the EAEU Customs Code. These audits can reach back three years from the date of customs declaration. During an audit, FCS may reclassify goods, assess additional duties, and impose fines. For high-value shipments, the financial exposure from reclassification can be substantial, particularly where the correct TN VED code attracts a significantly higher duty rate.

Currency control obligations under Federal Law No. 173-FZ add a further layer of compliance. Russian residents entering into foreign trade contracts above a threshold value (currently set by Bank of Russia instructions) must register the contract with an authorised bank and ensure that foreign currency proceeds are repatriated within the contractually agreed timeframe. Failure to repatriate proceeds on time triggers administrative fines under Article 15.25 of the Russian Code of Administrative Offences, calculated as a percentage of the unrepatriated amount per day of delay.

Many underappreciate the interaction between currency control and force majeure clauses. Where a foreign counterparty fails to pay due to circumstances outside its control, the Russian resident exporter may still face currency control liability unless it can demonstrate that it took all available measures to enforce payment - including initiating legal proceedings. Passive acceptance of non-payment is not a recognised defence.

A non-obvious risk arises in the context of intra-group transactions. Transfer pricing rules under Part II of the Russian Tax Code (Articles 105.1 to 105.25) apply to controlled transactions between related parties. Customs valuation and transfer pricing can conflict: a price that satisfies customs authorities as the transaction value may nonetheless be challenged by the Federal Tax Service as not reflecting arm's-length conditions. Managing this tension requires coordinated advice from customs and tax specialists.

Practical scenarios:

• A foreign parent company supplies components to its Russian subsidiary at below-market prices to reduce customs duties. The Federal Tax Service initiates a transfer pricing audit and assesses additional corporate income tax and penalties.
• A Russian exporter ships goods under a long-term contract with a foreign buyer. The buyer delays payment by 45 days beyond the contractual deadline. The exporter fails to notify its authorised bank and initiate recovery proceedings. FCS and the Bank of Russia impose currency control fines.
• An importer classifies electronic components under a TN VED code with a 0% duty rate. Post-clearance audit reclassifies the goods under a code attracting a 15% duty. The importer faces back-duties, interest, and a fine of up to double the unpaid duty amount.

Anti-corruption compliance in Russia-related business involves two distinct legal regimes that operate largely independently of each other. Russian domestic anti-corruption law, principally Federal Law No. 273-FZ 'On Combating Corruption' and the relevant provisions of the Russian Criminal Code (Articles 290-291.2 on bribery), addresses corruption involving Russian officials and Russian legal entities. The FCPA, administered by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), applies to any issuer listed on U.S. exchanges, any U.S. person, and any company that uses U.S. jurisdictional means - including U.S. dollar transactions - in connection with a corrupt payment.

The FCPA's anti-bribery provisions (15 U.S.C. § 78dd-1 et seq.) prohibit payments to foreign government officials to obtain or retain business. The books-and-records provisions require accurate accounting of all transactions. For companies with Russian operations, the practical risk areas include payments to customs officials to expedite clearance, payments to licensing authorities to obtain permits, and the use of local agents or distributors whose activities are not adequately monitored.

A common mistake is treating the use of a local intermediary as a compliance firewall. The FCPA's third-party liability doctrine means that a company can be held liable for payments made by its agent if the company knew or had reason to know that the agent would make corrupt payments. Red flags that trigger heightened due diligence obligations include: requests for unusually high commissions, requests for cash payments, agents with no apparent business infrastructure, and agents who claim special relationships with government officials.

Russian law imposes its own compliance obligations. Federal Law No. 273-FZ requires organisations to take measures to prevent corruption, including adopting anti-corruption policies, conducting due diligence on counterparties, and training employees. The Federal Law No. 115-FZ 'On Combating the Legalisation of Proceeds from Crime' (AML law) requires financial institutions and certain non-financial businesses to conduct customer due diligence and report suspicious transactions to Rosfinmonitoring (the Federal Financial Monitoring Service).

In practice, it is important to consider that Russian and foreign anti-corruption standards diverge in their treatment of facilitation payments. The FCPA contains a narrow exception for routine governmental action facilitation payments, though this exception is interpreted narrowly by DOJ and SEC. Russian law contains no equivalent exception - any payment to a public official to perform a duty they are already obligated to perform constitutes a bribe under the Russian Criminal Code.

To receive a checklist on FCPA and Russian anti-corruption compliance for international businesses, send a request to info@vlolawfirm.com.

Practical scenarios:

• A U.S.-listed company with a Russian subsidiary pays a local customs broker a fee that is passed on to customs officials to expedite clearance of time-sensitive shipments. The company faces FCPA books-and-records liability even if the anti-bribery violation is difficult to prove directly.
• A European company appoints a Russian distributor without conducting adequate due diligence. The distributor makes payments to regional procurement officials to win government contracts. The European company faces liability under the UK Bribery Act 2010 (Section 7, failure of commercial organisations to prevent bribery) if it cannot demonstrate adequate procedures.
• A Russian company seeking to list on a U.S. exchange discovers during pre-IPO due diligence that historical payments to licensing authorities were not properly recorded. Remediation requires restating financial records, implementing a compliance programme, and potentially making voluntary disclosure to the SEC.

Disputes arising from international trade contracts with a Russian nexus can be resolved through Russian state courts, international commercial arbitration, or foreign courts - subject to jurisdictional rules and the enforceability of any resulting judgment or award.

The Arbitrazh (commercial) courts of Russia have jurisdiction over commercial disputes involving Russian legal entities and individual entrepreneurs. The system is structured in three tiers: first instance courts, appellate courts, and the cassation level, with the Supreme Court of the Russian Federation (Верховный суд Российской Федерации) at the apex. Proceedings in Russian arbitrazh courts are conducted in Russian, and foreign parties must engage Russian-qualified counsel or representatives.

International commercial arbitration remains the preferred mechanism for cross-border disputes. The International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC, or МКАС при ТПП РФ) is the principal Russian arbitral institution. ICAC awards are enforceable in Russia under the Law of the Russian Federation 'On International Commercial Arbitration' (Law No. 5338-1), which is modelled on the UNCITRAL Model Law. Foreign arbitral awards are enforceable in Russia under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which Russia is a party.

A non-obvious risk in drafting arbitration clauses for Russia-related contracts is the Russian courts' historically expansive interpretation of their exclusive jurisdiction over disputes involving Russian state entities and disputes touching on Russian public policy. Courts have on occasion set aside or refused to enforce arbitral awards on public policy grounds where the dispute involved a Russian state-owned enterprise or a matter characterised as affecting Russian economic sovereignty.

The choice between ICAC arbitration and a foreign seat (Stockholm, Vienna, London, Singapore) involves a genuine trade-off. ICAC proceedings are conducted in Russian, are generally faster and less expensive than major international arbitration centres, and produce awards that are straightforwardly enforceable in Russia. Foreign-seated arbitration offers greater procedural neutrality and awards that are enforceable in a wider range of jurisdictions - relevant where the respondent has assets outside Russia.

Pre-trial procedures matter. Russian procedural law under the Arbitrazh Procedure Code (Article 4) requires parties to attempt pre-trial settlement before filing a claim in arbitrazh court, with a mandatory 30-day waiting period from the date of the claim letter unless the contract specifies a different period. Failure to observe this requirement results in the claim being returned without consideration.

Electronic filing is available in Russian arbitrazh courts through the 'My Arbitrator' (Мой Арбитр) system, which allows submission of claims, supporting documents, and procedural applications online. ICAC also accepts electronic submissions under its procedural rules.

Practical scenarios:

• A foreign supplier under a long-term supply contract fails to deliver goods. The Russian buyer files a claim in the competent arbitrazh court without sending a pre-trial demand. The court returns the claim. The buyer loses 30 days and, depending on the contract's limitation period, may face time pressure.
• A Russian company obtains an ICAC award against a foreign counterparty. The counterparty has no assets in Russia but holds real estate in a third country. Enforcement requires separate proceedings in that jurisdiction under the New York Convention.
• A dispute arises over the quality of imported goods. The contract contains no dispute resolution clause. Both parties claim jurisdiction in their home courts. The resulting parallel proceedings create significant cost and uncertainty until one court declines jurisdiction or the parties agree to consolidate.

A compliance programme for Russia-related international trade must address four functional areas: export control screening, customs classification and valuation, anti-corruption due diligence, and contract and dispute risk management. These areas interact, and a gap in any one of them can create liability that cascades across the others.

Export control screening requires a systematic process for classifying all products against applicable control lists before each transaction. This includes not only the product itself but all components, software, and technology incorporated into it. Screening must cover not just the immediate counterparty but the end-user and end-use. For high-risk transactions, an independent technical assessment of the product's classification is advisable.

Customs classification should be reviewed by qualified customs counsel before the first shipment of any new product category. Classification opinions should be documented and retained. Where there is genuine ambiguity, a binding tariff information ruling from the Federal Customs Service provides certainty and protection against post-clearance reclassification.

Anti-corruption due diligence on counterparties, agents, and distributors should be proportionate to risk. A tiered approach - lighter-touch screening for low-risk counterparties, enhanced due diligence for government-facing intermediaries - is both practical and defensible. Due diligence records must be retained and updated periodically.

Contract drafting for Russia-related trade should address: governing law, dispute resolution mechanism and seat, language of proceedings, force majeure and hardship provisions calibrated to the specific supply chain, currency control compliance obligations, and representations and warranties on export control compliance. Boilerplate clauses copied from contracts in other jurisdictions frequently fail to account for Russian law requirements.

The business economics of compliance investment are straightforward. A well-structured compliance programme for a mid-sized trading operation costs in the low to mid tens of thousands of USD or EUR annually in legal and advisory fees. The cost of a single enforcement action - whether a BIS administrative penalty, an FCPA resolution, or a Russian customs post-clearance assessment - typically runs to multiples of that figure, before accounting for reputational damage, management distraction, and the cost of remediation.

A loss caused by incorrect strategy is particularly acute in export control matters. A company that ships controlled goods to Russia without the required licence and is subsequently placed on a BIS Entity List faces denial of all export privileges - effectively cutting it off from U.S.-origin goods, software, and technology across its entire global business, not just its Russia operations.

To receive a checklist on building a Russia trade compliance programme, send a request to info@vlolawfirm.com.

What is the most significant practical risk for a foreign company in Russia-related trade today?

The most significant practical risk is extraterritorial exposure under foreign export control and anti-corruption regimes, particularly the U.S. EAR and the FCPA. Many foreign companies focus on Russian domestic compliance while underestimating the reach of U.S. and EU rules into their supply chains. The FDPR means that U.S. jurisdiction can attach to transactions that have no U.S. party and no U.S. territorial connection, purely on the basis of the technology lineage of the goods involved. A thorough supply chain audit - tracing the origin of all components and the technology used to manufacture them - is the starting point for managing this risk.

How long does it take and what does it cost to resolve a commercial dispute involving a Russian counterparty?

Timelines and costs vary significantly depending on the forum and the complexity of the dispute. A first-instance arbitrazh court proceeding in Russia typically takes between six and eighteen months from filing to judgment, with appeals extending the timeline further. ICAC arbitration for a straightforward commercial dispute typically concludes within twelve to twenty-four months. Legal fees for international commercial arbitration involving Russia-related disputes generally start from the low tens of thousands of USD or EUR for simpler matters and rise substantially for complex, high-value cases. State duties in Russian arbitrazh courts are calculated as a percentage of the amount in dispute, subject to a cap. Enforcement of a foreign arbitral award in Russia adds further time and cost if the respondent contests enforcement.

When should a company choose Russian arbitrazh court proceedings over international arbitration?

Russian arbitrazh court proceedings are preferable when the respondent's assets are located exclusively in Russia, when the contract value is relatively modest and the cost of international arbitration would be disproportionate, and when speed of enforcement within Russia is the primary concern. International arbitration is preferable when the respondent has assets in multiple jurisdictions, when procedural neutrality is important, when the contract involves a state entity and there is concern about court impartiality, or when the governing law is not Russian law. The choice should be made at the contract drafting stage, not after a dispute arises - retrofitting a dispute resolution clause once a relationship has deteriorated is rarely effective.

International trade involving Russia requires simultaneous management of Russian domestic law, extraterritorial foreign controls, and anti-corruption obligations with global reach. The legal framework is dense, the enforcement environment is active across multiple jurisdictions, and the cost of non-compliance - measured in fines, debarment, and reputational damage - consistently exceeds the cost of building a sound compliance structure in advance. Businesses operating in this space benefit from coordinated legal advice that spans customs, export controls, anti-corruption, and dispute resolution.

Our law firm VLO Law Firm has experience supporting clients in Russia on international trade, export control, customs, anti-corruption compliance, and commercial dispute resolution matters. We can assist with compliance programme design, pre-transaction due diligence, customs classification reviews, arbitration clause drafting, and representation in arbitrazh court and ICAC proceedings. To receive a consultation, contact: info@vlolawfirm.com.