New Zealand has finally joined its international partners in imposing tougher sanctions on Russia over the war in Ukraine. The Detail looks at how sanctions work, why it’s not just New Zealand laws that apply to exporters and investors, and what it takes to extricate business from Russia.
Russia is facing some of the most robust economic sanctions ever imposed by governments around the world, in response to the war in Ukraine.
New Zealand has brought itself in line with its international partners, with Parliament rushing through the historic Russia Sanctions Act.
But for exporters and investors with ties to Russia, the hard work begins now.
“New Zealand businesses have so much to come up to speed on in such a short period of time,” says lawyer Sarah Salmond, a sanctions specialist.
Salmond, a partner at law firm at MinterEllisonRuddWatts, is helping clients with Russian connections navigate and comply with the new sanctions regime.
She says more Kiwi companies are impacted than initial media reports would have suggested.
“As more and more countries introduce those sanctions, they all overlap and they become an increasingly complex web of legal obligations that our clients have to comply with,” she says.
New Zealand does more business with Russian banks than people realise – and the effects go way beyond the specific sanctions themselves, Salmond says.
Take a case of New Zealand apples: there is no prohibition on sending the apples, but shipping companies are now refusing any contracts involving Russia and DHL will not handle trade documents relating to Russian businesses.
Even if you do get your product into Russia, getting paid is the next hurdle. Russian banks have been cut off from SWIFT, the world’s main inter-bank payment system.
Salmond explains why – for the first time – the New Zealand Government has been able to impose sanctions in the absence of a UN Security Council resolution, with its bespoke law that responds specifically to Russia’s invasion of Ukraine.
The first tranche of sanctions under the new law includes the extension of travel bans and targeted asset freezes. Sanctions on “a long list of Russian banks” mean banks here will not be able to get payments to anyone in Russia.
But Salmond cautions that New Zealand’s sanctions are relatively symbolic.
“It’s the combined effect of Western sanctions on Russia. That will have an impact.”