Since Russia launced a full-scale invasion of Ukraine in February 2022, nearly half a thousand foreign companies have fully exited Russia, including McDonald’s and Unilever, while more than a thousand foreign companies have scaled back operations in the Russian market. It became untenable to operate in the aggressor country as sanctions, humanitarian, and reputational risks build up under the pressure from Western governments and consumers. For a business that has already determined to exit Russia, however, the road to the exit is still fraught with complex rules intended to make the whole process difficult, including steep discounts of the assets’ market value more than 50%, a contribution to the Russian federal budget (also known as the “exit tax”) that has increased from starting 10%, and a consent from the Russian president for sizeable transactions. While businesses may still try their best to structure the transaction in their favor, they must also get blessings and exemptions from the sanctioning governments prohibiting transactions with the Russian government and sanctioned entities. Understanding that every different transaction may require specific exemptions, below are stated exemptions the US, EU, and UK put out:
US: Under the Directive 4 of E.O. 14024, “Prohibitions Related to Transactions Involving the Central Bank of Russia Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation,” prohibits any transaction involving the aforementioned Russian entities (collectively, “Directive 4 entities”). General License (GL) 13 series authorize U.S. persons and entities to pay taxex, fees, or import duties, and purchase or receive permits, licenses, registrations, or certification involving Directive 4 entities on the condition that such transactions are ordinarily incident and necessary to day-to-day operations. However, payment of exit taxes, which are known to involve payments to Directive 4 entities, is not considered ordinarily incident and necessary to day-to-day operations in Russia and, thus, is not authorized under GL 13 series and should seek a specific license from OFAC.
EU: EU takes a stance that exit tax is a precondition imposed by the Russian Government for allowing EU companies to divest from Russia and does not amount to enabling the Russian Central Bank to manage its reserve or assets. Therefore, Article 5a(4) of Council Regulation (EU) No 833/2014 prohibiting transactions related to the management of reserves as well as assets of the Central Bank of Russia does not apply to the payment of exit tax. In addition, to facilitate an expeditious exit from the Russian market, the EU has provided temporary derogations strictly necessary for the divestment from Russia or the wind-down of business activities in Russia subject to the fulfilment of certain conditions. In its 15th Russia Sanctions Package, the EU has extended the December 31, 2024 deadline for certain derogations necessary for divestments from Russia until December 31, 2025.
UK: Per the statutory guidance on the Russia (Sanctions) (EU Exit) Regulations 2019, a license may be granted for services that are necessary for non-Russia persons to divest from Russia, or to wind down business operations in Russia. For instance, on January 10, 2025, the Office of Financial Sanctions Implementation (OFSI) issued a general license authorizing the wind-down or divestment from any transactions involving Gazprom Neft and PSJC Surgutneftegas, both designated parties, or any entitiy owned or controlled by either of them, until February 27, 2025.