Non-Russian companies dealing with non-sanctioned Russian entities face stark challenges if they want to continue doing business while at the same time complying with the increasing number of sanctions imposed on Moscow after its forces invaded Ukraine says the managing partner of a Washington-based law firm.

One of those challenges is that transactions that employ letters of credit (L/Cs) may be frustrated, says Timothy Mills of Asia and Middle East International Law Group.

Blocked from SWIFT

A non-Russian business may for example not have appreciated that an L/C in a transaction may be issued by one of the seven Russian banks that now are blocked from the SWIFT network says Mills.

Because the issuing Russian bank has been disconnected from the SWIFT system, the negotiating bank would no longer being able to communicate the documents through the secure messaging platform to the issuing Russian bank.

Business disruption

In another example, the lawyer discusses a non-Russian business that has been a repeat buyer of goods, services or commodities from a non-sanctioned Russian business, that also initially believed itself to be clear of sanctions-related risk.

Historically, the non-sanctioned Russian business has been an excellent customer of the non-Russian buyer, has always performed satisfactorily, and the financial arrangements (consisting of an L/C provided by buyer's bank) have become routine and completely effective.

But now the non-sanctioned Russian business cannot deliver the contracted-for goods, services or commodity because of restrictions on Russian banks and the non-sanctioned Russian business will not obtain or be able to produce the documents necessary for the non-sanctioned Russian business to negotiate the L/C, concludes Mills.

A full version Timothy Mills' client alert on Russian sanctions can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.