Further Russia Sanctions
For companies concerned about further Russia sanctions, May 25 is critical. That is the date of elections in Ukraine. If those elections do not take place or if they are disrupted in the eastern part of the country, it is likely the United States would impose much stronger sanctions.
To date, sanctions have had a relatively minimal impact, targeting individuals in Putin’s inner circle. The next round is likely to target companies in the financial and energy sectors.
There is no doubt that Putin would like to disrupt these elections; the question is whether he would be willing to subject the struggling Russian economy to a further economic blow. In the first four months of this year, there has already been unpredicted capital flight from Russia. To minimize uncertainty about the extent to which the elections were free and open, Senator John McCain (R-Ariz.) and Madeline Albright will be in Ukraine, representing respectively the International Republican Institute and the National Democratic Institute.
Another critical issue after May 25 will be the position of the EU in view of its dependence on the Russian economy and energy. The U.S. could unilaterally impose financial sanctions and that would affect European banks by precluding them from doing dollar denominated transactions with Russian financial institutions. On the other hand, the U.S. may not be willing to break with its European allies over sanctions. Perhaps the Europeans will be willing to follow the lead of the U.S. A May 12 resolution of the council of the EU provided authority for further sectoral sanctions, but the EU is reluctant to impose them. The statement by Chancellor Merkel on her recent meeting with President Obama may signal a tougher stand by Germany if the May 25 elections are disrupted
All companies doing business in or with Russia or those in the financial and energy sectors should follow developments closely. They should be prepared to take prompt action after May 25 to avoid noncompliance if the U.S. government imposes stronger sanctions. Congress can be expected to weigh-in, as well.