Client update: recent business developments in Russia

03 May 2022

The current military conflict in Ukraine has caused significant disruption to the world’s economic affairs. In the past couple of days, we have identified the most notable developments that will affect global and regional business communities.

• On 03 May, Russian President Vladimir Putin signed an Executive Order “on retaliatory special economic measures in connection with unfriendly actions of certain foreign states and international organisations”. In the next 10 days the Russian government will follow up with the list of Western individuals and companies under Russian sanctions. Federal and local state authorities, as well as all organisations and individuals based in Russia, will be prohibited from making transactions and fulfilling their financial obligations to all foreign entities mentioned in the sanctions list.

• As part of the government’s retaliatory measures, Russia already placed key US politicians (including US President Joe Biden, State Secretary Antony Blinken and White House press secretary Jen Psaki) on its own sanctions list on 15 March. Furthermore, Moscow refused to continue negotiations with Japan on a peace treaty and the status of Kuril Islands on 21 March.

• Also on 03 May, BP reported $20,38B losses related to its decision to sell 19,75% of Rosneft on 27 February this year due to the situation in Ukraine. In the meantime, Indian national energy companies are looking at the possibility to acquire the former BP share of Rosneft. This move will likely further shift the balance of “energy” power to the east.

• On 02 May, Vladimir Potanin’s Interros Group acquired United Card Services (UCS), which was previously a part of the American group of companies Global Payments Inc. With the recent purchase of shares in Rosbank and Oleg Tinkov’s TCS Group, Potanin ($28,8B net worth, 2022) is becoming one of the dominant players in the Russian banking sector.

• On 28 April, Yandex agreed to sell its “Yandex News” and “Yandex Dzen” (a blog platform) sections to VK Group, a conglomerate owned by Russian billionaire Alisher Usmanov. This is part of VK Group’s move to completely control the Russian media and social media sphere.

Given these developments, western businesses remaining in, or continuing to work with Russia will need to consider the escalating political risks. Now it is especially important to understand the political dynamics, sanction regimes and supply chains linked to Russian entities.

Audere offers enhanced due diligence and investigations coverage in response to the changing trading environment in Russia. The rapidly shifting regulatory environment – both internationally and within companies’ own internal systems – means that any company doing business in Russia, or transacting in Russia, must review their entire local operations to ensure compliance with new regulations and identify new risks.

For more information please contact us at [email protected]audereinternational.com

Nikita Gryazin is an Audere International research analyst with a focus on British, European, Russian and Central Asian jurisdictions. Fluent in Russian and proficient in complex data collection and analysis, Nikita is responsible for carrying out political risk assignments using open-source and human source networks.