In the face of Russia’s gross violation of both the UN Charter and international law via their invasion of Ukraine, Singapore’s Minister for Foreign Affairs announced in his Ministerial Statement to Parliament on 28 February 2022 of the Singapore Government’s intentions to, in concert with other like-minded countries, impose appropriate sanctions and restrictions against Russia. This move is notwithstanding the failure of the UNSC resolution to condemn Russia’s aggression against Ukraine failing to pass due to Russia’s veto and will serve as only the second time that the country has decided to censure a foreign power with UNSC assent.
Sanctions and Restrictions
The sanctions and restrictions imposed by Singapore are aimed to constrain Russia’s overall capacity to conduct war against Ukraine. Briefly, as mentioned by the Minister in his Statement in Parliament, these economic sanctions and restrictions can be summarised into two main categories:
- Export Bans – Banning the export of all times that can be used directly as weapons in Ukraine to inflict harm or to subjugate the Ukrainians or that can contribute to offensive cyber operations; and
- Financial Bans – Financial measures prohibiting any dealings with designated Russian banks, entities and activities in Russia, and fund-raising activities benefiting the Russian government. This shall include specific prohibitions on digital payment token service providers from facilitating transactions that cold help to circumvent these financial measures.
As part of its unilateral sanctions against Russia, Singapore will enforce the imposition of export controls on items that can be directly used as weapons to inflict harm on or to subjugate the Ukrainians, as well as items that can contribute to offensive cyber operations. In this regard, all permit applications to Russia involving any of the following items will be rejected altogether:
- All items in the Military Goods List under the Strategic Goods (Control) Order 2021; and
- All items under Category 3 (“Electronics”), Category 4 (“Computers”) and Category 5 (“Telecommunications and Information Security”) of the Dual-Use Goods List of the Strategic Goods (Control) Order 2021.
To refer to the full list of these items, kindly refer here.
In relation to the financial bans that are being imposed on Russia, the Monetary Authority of Singapore (“MAS”) has issued the Notice SNR-N01 Financial Measures in Relation to Russia and Notice SNR-N02 Financial Measures in Relation to Russia – Non-prohibited Payments and Transactions.
The financial measures set out under these two Notices apply to all financial institutions in Singapore (including banks, finance companies, insurers, capital markets intermediaries, securities exchanges, and payment service providers), and are targeted at designated Russian banks, entities and activities in Russia and fund-raising activities benefiting the Russian government.
A crucial additional detail is that, in addition to these entities, all digital payment token service providers are specifically prohibited from facilitating transactions that could aid the circumvention of the financial measures.
Broadly, the financial measures imposed on financial institutions under the MAS Notices can be broken down into 3 main categories:
- Obligation to immediately freeze funds, or other financial assets or economic resources of any of the following: (i) VTB Bank Public Joint Stock Company; (ii) The Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank; (iii) Promsvyazbank Public Joint Stock Company; and (iv) Bank Rossiya (collectively, the “Banned Entities”);
- Obligation to inform the MAS of any fact or information relating to the funds, other financial assets or economic resources owned or controlled, directly or indirectly, by any of the Banned Entities; and
- Prohibition of:
- Entering into transactions or establishing business relationships with any of the Banned Entities;
- Providing financing or financial services in relation to the delivery of items subjected to the export bans;
- Providing financial services in relation to raising of new funds for the Russian Government and the Central Bank of the Russian Federation, or any entity owned or controlled by them or acting on their direction or behalf;
- Providing financial assistance in relation to breakaway regions of Deontsk and Luhansk for the specific sectors of: transport, telecommunications, energy and prospecting, exploration and production of oil, gas and mineral resources; and
- Entering into or facilitating any digital payment token transactions where the proceeds or benefits from such transaction may be used to facilitate any of the transactions or activities prohibited in the Notice.
Likely Effect of these Sanctions and Restrictions
Overall, it is unlikely that these newly imposed sanctions and restrictions on Russia will have too much of a significant adverse impact on Singaporean companies on a whole. Based on the public statistics available, Singapore’s imports from Russia was approximately US$1.38 billion during 2020 and its exports to Russia was an estimated US$547.58 million during 2020 (UN Comtrade data and statistics). Accordingly, with the imports and exports with Russia only accounting for a small percentage of the country’s total trading, the Singapore economy will not be expected to take a big hit from the local sanctions alone.
However, one thing to consider is that it is yet to be determined the effect of these local sanctions when coupled with the other global sanctions imposed on Russia by other countries, which include global powers like the United States and the European Union. Having just come out of the aftermath of the tragic COVID-19 pandemic, it remains uncertain whether there will be worsening supply chain disruptions that could affect Singapore companies more drastically than anticipated. In this regard, we will have to monitor the situation as the events continue to play out.
Steps to Take
In the meantime, all Singapore companies must take the following immediate steps in the wake of these new sanctions:
- Cease transacting with any of the Banned Entities;
- Stop buying and selling new securities or providing financial services that facilitate fundraising by the Russian government, the Central Bank of the Russian Federation. This includes any entity owned or controlled by them or acting on their direction or behalf;
- Stop providing financing or financial services on any items or goods subject to the export bans (see above for details on export bans);
- Ensure that any digital payment transactions, if any, are not from or deal with any of the Banned Entities; and
- Perform more comprehensive due diligence checks to determine whether, moving forward, new transactions face any sanction-risks.