After repeated calls from U.S. Sen. Sherrod Brown (D-OH), the Department of State recently issued new guidance to U.S. businesses warning that continuing to work with Russia could imperil them legally and financially.
“By continuing to operate in Russia, American businesses could be inadvertently funding Putin’s gruesome war,” Brown said. “We must do everything in our power to stop any flow of funds to Putin’s war operation and continue to hold the lawless Russian regime accountable.”
Although the military situation in Ukraine has seemingly shifted in Russia’s favor in recent months as Western economic and military support has stalled, those same Western nations have been increasingly turning to economic creativity to make their point. In the U.K., for example, British Prime Minister Rishi Sunak recently published a call for boldness in seizing Russian assets frozen since the invasion of Ukraine began in 2022, and repurposing them for Ukraine’s own use.
More than $300 billion in Russian central bank assets have been frozen by Western nations since Russia first invaded Ukraine.
This is the background under which the State Department’s new guidance emerged, warning that continued dealings with Russia could mean American businesses would be indirectly and inadvertently funding Putin’s invasion of Ukraine. As of June last year, more than 300 American companies have continued to operate in Russia despite ongoing sanctions of the country. By operating there, they have also continued to pay taxes to the Russian government.
“The United States assesses that doing business in the Russia Federation and in Russia-occupied territories of Ukraine poses serious legal, financial, and reputational risks,” the State Department’s guidance said. “Russia’s kleptocratic environment undermines fair competition and the rule of law, making businesses susceptible to extortion, property seizures, and U.S. law enforcement action. Businesses increasingly risk severe civil and criminal penalties in navigating the raft of economic sanctions, export controls, and import restrictions imposed on Russia by the United States and its allies and partners. In addition, businesses are being forced to cooperate in Russia’s military mobilization and could be implicated in Russia’s commission of war crimes and crimes against humanity as part of Russia’s brutal war against Ukraine.”
The department openly warned U.S. businesses their actions could lead to sanctions, export controls, import restrictions, money laundering vulnerabilities, corruption charges and more, without proper heightened diligence and mitigations.