Russian Federation: Business Implications Of Russian Sanctions Against Turkey

Last Updated: 18 July 2016
Article by Yana Dianova

Orçun Çetinkaya, Partner at Moroğlu Arseven, discussed the details and business implications of recent Russian sanctions against Turkey with Yana Dianova, Director of Corporate and Commercial Law in the Moscow office of GRATA International Law Firm.


Orçun Çetinkaya: Following the incident of a Russian Su-24 jet being downed by Turkish F-16 fighters on 24 November 2015 causing the Russian aircraft to crash in the Bayirbucak region of northern Syria, Russia imposed a series of economic measures and sanctions against Turkey. What are those sanctions?

Yana Dianova: Sanctions comprise a number of special economic and administrative measures against the Republic of Turkey. The sanctions were imposed by Decree No. 583 signed the President of the Russian Federation ("the RF President") on 28 November 2015 in connection with the events that took place near the border between Syria and Turkey and detailed in the decisions of the Government of the Russian Federation ("the RF Government") in accordance with this Decree.

Decree No. 583, which came into force on the date of its signing, provides, inter alia:

  1. a ban or restriction on foreign trade operations related to importing certain goods originating from Turkey into Russian territory;
  2. a ban or restriction for organisations under the jurisdiction of Turkey as well legal entities controlled by Turkish nationals or organisations under the jurisdiction of Turkey, on performing (provision) certain types of works (services) in Russian territory;
  3. a ban for employers and customers of works (services) not included in the list approved by the RF Government on engaging Turkish nationals who are not in employment and(or) civil-legal relationships with such employers, customers of works (services) as of 31 December 2015, in employment relations, performance of works and provision of services, effective from 1 January 2016;
  4. suspension from 1 January 2016 of the Agreement between the RF Government and the Government of Turkey for the terms and conditions of mutual trips of citizens of the Russian Federation and nationals of Turkey dated 12 May 2010, in terms of travels by Turkish nationals to Russia without visas, with certain exceptions.

Connected to this, the RF Government was instructed to take measures:

– to introduce the ban on charter flights between Russia and Turkey;

– to strengthen the control over the Turkish road carriers in Russia territory to ensure safety;

– to strengthen control in Russian waters and seaports in the Azov-Black-Sea basin, including in order to prevent illegal staying and movement of marine and other vessels over there.

Decree No. 583 also required tour operators and travel agencies to abstain from selling tours to Turkey to Russian citizens.

Orçun Çetinkaya: The sanctions caused massive media coverage in Turkey. They are interpreted as though the trade between Turkey and Russia has come to an end. Who is affected by the sanctions?

Yana Dianova: The bans and restrictions under Decree No. 583 and the RF Government's related decisions affect:

  1. wholesale suppliers and buyers (importers) of banned goods;
  2. organisations under Turkey's jurisdiction (i.e. established and existing under Turkish laws), as well legal entities controlled by Turkish citizens or organizations under Turkey's jurisdiction, branches and representative offices of such organizations in Russia, that perform/provide the works/services which are banned in Russian territory;
  3. employers and customers of works (services) in Russia that engage Turkish citizens starting from 1 January 2016, irrespective of their nationality, except for those specifically exempted from the RF Government's decisions;
  4. travel agents, tour operators and other parties engaging in charter flights between Russia and Turkey, as well as those who organize Turkish trips and tours for Russian citizens;
  5. airline companies providing charter flights between Turkey and Russia1;
  6. automotive carriers providing bilateral carriages between Turkey and Russia2;
  7. Turkish nationals traveling on business and other trips to Russia for up to 30 days. An exception applies for those with a temporary residence permit or a residence permit for the territory of Russia, as well as for those involved in Turkish diplomatic and consular missions in the territory of Russia, provided they have valid official and special passports, together with their families.

The criteria for organisations being under control of Turkish citizens are determined in accordance with the Federal Law N57-FZ "On the Procedure for Foreign Investments in the Business Entities of Strategic Importance for Russian National Defence and State Security". Accordingly, having control over a business entity refers to the ability to directly or through third parties determine the business entity's decisions, by means of:

– controlling the business entity's voting shares (stock), or

– participating in general shareholders (members) meetings, or

– participating in the business entity's board of directors (the trustee council) and other management bodies, or

– entering into a contract with the business entity regarding exercising the functions of its executive manager (the managing organization) or a similar agreement.3

Orçun Çetinkaya: Can you explain the measures that have been put in place in the auspices of sanctions which I can give a clearer picture to Turkish businessmen who have interests in Russia regarding the consequences and implications of sanctions.

Yana Dianova

Import bans for certain Turkish goods

Decision No. 1296 from the RF Government, which came into force on 1 December 2015, outlined a list of agricultural products, raw materials and foodstuffs, originating from Turkey, which became prohibited from being imported to Russia from 1 January 2016.

The list includes several types of vegetables, fruits and berries, as well certain poultry meat and its by-products, salt and chewing gum.

Importing the listed products for personal use is permitted, to the extent allowed by laws of the Eurasian Economic Union.

Ban on performing or providing certain types of work and services

Decision No. 1457 from the RF Government (dated 29 December 2015) outlined a list of types of works and services which become banned from being performed or provided in the Russian Federation's territory by organisations under Turkey's jurisdiction, as well as organisations controlled by Turkish citizens, effective from 1 January 2016.

Prohibited work and services include:

– construction of buildings, construction of engineering and special construction works;

– activities regarding architecture and engineering design, technical testing, research and analysis;

– activities of travel agencies, as well as other organisation providing services in the tourism sector;

– operation of hotels and other places of temporary residence;

– work performed and services rendered for state and municipal needs;

– woodwork.

The ban does not apply to work or services envisaged by contracts entered into prior to adoption of Decision No. 1457, for the duration of such contracts.

Ban on employing Turkish nationals

From 1 January 2016, Russian employers and customers of works (services) may not engage Turkish nationals who were not in such employment and(or) civil-legal relationships on 31 December 2015, in employment relations, performance of works or provision of services.

The RF Government has issued a list of exempted Russian legal entities, branches and representative offices of non-Russian companies (Decision No. 1458, dated 29 December 2015).

Decision No. 1458 states that the number of employees who are Turkish citizens, employed or engaged for performance of works (provision of services) by employers included in the exemption list must not exceed the number of employees who were employed or engaged for performance of works (provision of services) by 31 December 2015.

Decision No. 1458 was amended 6 May 2016 by Decision No. 396, with amendments entering into force on 24 May 2016. Accordingly, two different exemption lists are now provided:

– employers which are exempt from the ban on employing Turkish citizens, provided the employment contracts were signed before 31 December 2015 and the number of Turkish employees does not exceed the number employed as at 31 December 2015. The list includes 46 Russian legal entities, 6 branches and 2 representative offices of Turkish companies, most of which are engaged in construction (such as Renaissance Construction, Delta Construction, Enka, Yamata). The amendment includes 7 new banks: Denizbank JSC, ISHBANK JSC, Credit Europe Bank JSC, YAPY CREDIT BANK JSC, Guarantee-Bank Moscow JSC, ProKommertzBank JSC, ZeeratBank JSC.

– employers which are exempt from the ban on employing Turkish citizens, provided the employment contracts were signed before 31 December 2015. The list includes 11 Russian legal entities and 3 branches of Turkish companies, mostly engaged in construction.

Ban on charter flights and tours to Turkey

Decision No. 1296 banned charter flights between Turkey and Russia, effective from 1 December 2015.

The Federal Agency for Tourism of the Russian Federation (Rostourism) issued an information letter on 24 November 2015 in which it recommended Russian tour operators and travel agents suspend promotion and sales of tourist products and separate tourism services to Turkey, including those provided through third party countries.

In performance of the Decree No. 583, Rostourism excluded 19 tour operators from the Uniform Federal Register of Tour Operators, effective from 1 January 2016, thereby banning them from selling tours in Russia (Rostourism Order No. 569-Pr-15, dated 30 December 2015). The excluded tour operators include Pegas Toristic, Anex Tour, Coral Travel and Sunmar Tour.

Orçun Çetinkaya: Sanctions have been debated heavily in Turkey among legal, business and political circles. However, sanctions are one of the most effective trade remedies which are used by sovereigns to force their counterparts to comply with their regulations or policies having international reach. Prior to the Russian sanctions, Turkey in general, goods from Turkey, Turkish citizens and companies in particular, were not the subject of a foreign country's sanctions. Are sanctions generally used by Russia as a trade remedy against the subject of other sovereigns? Are there any other countries sanctioned by the Russia Federation?

Yana Dianova: The Decree of the RF President No. 560, dated 6 August 2014, banned importing certain agricultural products which originated from countries that imposed economic sanctions on Russia.

It applies to agricultural products, raw materials and foods originating from: Albania, Australia, Canada, Iceland, Lichtenstein, Montenegro, EU member-states, Norway, the Ukraine4 and the United States.

Agricultural products, raw materials and foods banned for import in Russia (referring to the Foreign Economic Activity Commodity Classification of the Customs Union) originating from these countries (the "banned products") include:

– meat of cattle and pork (fresh, chilled or frozen);

– meat and edible by-products of certain poultry (fresh, chilled and frozen);

– salty, dried, smoked meat and meat in brine;

– fish, shell fish, mussels and other aquatic invertebrates (with some exceptions);

– milk and milk products, including prepared products like cheese and cottage cheese (with some exceptions);

– vegetables, edible roots and tube crops;

– fruit and nuts;

– sausages and other products from meat, meat by-products or blood; food products prepared on their basis;

– milk-containing food products and products on the basis of vegetable oils;

– food or finished products manufactured with the use of cheese production technologies and containing 1.5 and more weight percent of milk fat.

The Federal Customs Service of the Russian Federation ("FCS") controls compliance with the import prohibition for the banned products.

According to FCS Order No. 1496, dated 7 August 2014, the heads of regional customs offices and customs directly reporting to the FCS must:

  1. determine the country of origin of the products imported into the customs territory of the Customs Union5 according to the established procedure, including actual control within the risk management system, if required;
  2. if declaration of banned products is detected, refuse to release such products according to the declared customs procedure and take measures for their immediate export from the customs territory of the Customs Union.

The RF President extended these sanctions till 5 August 2016 (Decree of the RF President No. 320, dated 24 June 2015).

From 6 August 2015, any banned products imported to Russia became subject to destruction (Decree of the RF President No. 391, dated 29 July 2015).

The products imported by individuals for personal consumption, or involved in customs transit for transport to third countries, are exempt from Decree No. 391, provided:

– veterinary and phytosanitary accompanying documents for such products are authentic and comply with the products;

– authorities have grounds to believe the products will actually be delivered to a place outside the territory of Russia, in accordance with the conditions for the customs procedure of customs transit.

The Decision of the RF Government No. 1458 approved the Regulations on destruction of agricultural products, raw materials and food products included in the list of products originating from Albania, Australia, Canada, Island, Lichtenstein, Montenegro, EU member-states, Norway, the Ukraine and the United States that are prohibited for import in the territory of the Russian Federation (Decision No. 774, dated 31 July 2015).

The decision to confiscate and destroy banned products is made by authorized officers of the FCS, the Federal Service for Veterinary and Phytosanitary Supervision, or the Federal Service for Supervision in the Domain of Consumer Rights and Human Welfare. These parties will make such a decision upon detecting performance of foreign economic operations which contemplate importing the banned products, irrespective of whether or not the person(s) performing such operations has been detected.

Orçun Çetinkaya: Is there any indication about lifting or loosening the sanctions?

Yana Dianova: The special economic measures against Turkey were introduced without limitation of term, based on Federal Law No. 281-FZ dated 30 December 2006 "On Special Economic Measures" and Federal Law No. 390-FZ dated December 2010 "On Security".

The RF President is authorized to establish the term of effectiveness for special economic measures and to decide on lifting the respective measures if the circumstances that served as grounds for introducing such measures no longer exist (Art. 5 of Federal Law No. 281-FZ).

According to the Russian Federation's Minister of Economic Development, Alexey Oulukaev6, Russia will not introduce any additional sanctions unless Turkey aggravates political tensions.

The RF Government has developed draft rules (the "Draft Rules") for selecting contracts which are exempt from the sanctions imposed under Decree No. 583 (Decree of the RF President No. 669, dated 28 December 2015). The Draft Rules apply to contracts being entered with organisations under the jurisdiction of Turkey, under control of Turkish nationals and/or organisations under the jurisdiction of Turkey for supply of goods and performance of works (services).

According to the Draft Rules, contracts with Turkish entities and the entities under control of Turkish entities or nationals can be exempt if they meet one of the following criteria:

– the contract's goods, works (services) are banned or restricted by the RF Government; or

– if a contract is not entered, it will impact performance of the Russian Federation's internal or external obligations and it is not possible to replace the respective goods, works, service, or replacement from the other sources will involve disproportionately high expenses; or

– the contract affects the Russian Federation's security interests or interests of a significant number of consumers in the Russian Federation and it is not possible to replace the respective goods, works, service, or replacement from other sources will involve disproportionately high expenses; or

– prevention on entering the contract will involve material difficulties for implementing the Russian Federation's economic, technical, financial or innovation programs, or a constituent entity thereof.

Selecting contracts for supply of goods will be made by the sub-committee for customs-tariff regulation and non-tariff regulation, protective measures in foreign trade of the Government committee for economic development and integration. Contracts for performing works and providing services will be selected by the Inter-agency committee, under the Ministry for economic development of the Russian Federation.

The Draft Rules provide that for a contract to be included in the exemption list, a Russian entity, a federal executive body of the Russian Federation, or an executive body of a constituent entity thereof, should submit documents to the Ministry for economic development as required in a schedule to the Draft Rules, as well as a letter justifying the necessity to enter the respective contract.

The Draft Rules have undergone all necessary hearings and appraisals. However, the date of their adoption by the RF Government and entry into force is not known yet.

Orçun Çetinkaya: Given that Turkish companies are understandably concerned about their future in Russia, do you expect any exits due to the sanctions?

Yana Dianova: To our knowledge, there have not been announcements so far on the part of business entities controlled by Turkish entities or nationals of their exit from Russia. It appears that until the political disaccords between Russia and Turkey subside, the general trend is to wait and, if applicable, adapt to the restrictions imposed by the sanctions.

Major tour operators Pegas Toristic, Anex Tour, Coral Travel and Sunmar Tour were excluded from the Uniform Federal Register of Tour Operators from 1 January 2016. According to their public announcements, they continue to operate in Russia either through partner tour operators or subsidiaries7.

1. The ban on such flights was introduced by the Decision No. 1296 of the RF Government, effective from 1 December 2015.
2 The Decision No. 1296 of the RF Government restricted the number of permits for such carriages to be issued in 2016 to Turkish automotive carriers to 2000.
3 Note: with respect to a Russian business entity of strategic importance which exploits subsurface areas with federal status, "control" means the ability of a foreign investor or a group of persons to directly or indirectly control 10% or more of the business entity's total voting shares (stock), or the right of a foreign investor or a group of persons to appoint a sole executive body and (or) 10% or more members of a collegial executive body of such a business entity, or absolute ability of a foreign investor or a group of persons to elect 10% or more members of the boards of directors (the trustee council), or other collegial executive body of such business entity.
4. Sanctions apply from 1 January 2016 for the Ukraine.
5. According to Article 2 of the Customs Code of the Customs Union, the common customs territory of the Customs Union comprises the territories of the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, Kyrgyz Republic and the Russian Federation (the member states of the Customs Union), as well as artificial islands, installations, fixtures and other facilities located outside the territory of the member states of the Customs Union with respect to which the latter have jurisdiction.
6. http://tourism.interfax.ru/ru/news/articles/32988
7. http://profi.travel/news/21159/details

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions