US Sanctions Stop Microsoft Sales to Numerous Russian Firms

US Sanctions Stop Microsoft Sales to Numerous Russian Firms

After the new US sanctions, two official distributors of Microsoft Corp. in Russia have placed restrictions on sale of the company’s software to approximately 200 Russian companies. Notifications had been circulated by the distributors for this purpose. Most of the focus on US sanctions has been about how others are skirting them, but the decision of the Russian distributors is an example of how much the restrictions that were imposed on November 28 have been toughened up and are beginning to bite. Under the new measures, all Russian firms that are subject to the sanctions will find the duration of their loans reduced from 30 days to 14 days.

Moreover, Russian energy companies that are mentioned on the US sanctions list will also see their loan duration fall from 90 days to 60 days. Previously, only Western banks that offered loans to Russian firms had been affected, but due to the reduced financing period, a number of companies that supply goods and services to Russian firms are afraid they could break the rules. In Russia, it is routine for suppliers to have to wait for weeks and even months after submitting invoices for goods and services before they get paid.

Lawyers have advised some Western firms that, in theory, the US Treasury Department could consider it a violation of the sanctions. Merlion, a Russian company and one of the Microsoft distributors, issued a notification to its partners in which it said all sanctioned buyers of Microsoft licenses may have to pay upfront in some situations or clear payments within tight deadlines. RRC, the second distributor of the software giant, said that firms that are on the US sanctions list would have to accept serious restrictions on Microsoft orders. Both the distributors cited rules that have been introduced in the new US sanctions package for the reason for the new restrictions.

The new sanctions were signed into law on 2nd August, 2017 due to Russia’s involvement in cyberattacks and in Ukraine. Microsoft stated that it was strongly commitment to fulfilling all legal requirements and its partners all over the world would also be in compliance, thanks to its robust processes. As per the guidance published by the Treasury’s Office of Foreign Assets Control (OFAC) regarding US sanctions, the US firms are allowed to conduct transactions with the companies that are part of the US sanctions list, but the payment terms shouldn’t be longer than the loan duration specified.

A civil penalty can be imposed on violators, which can be around $250,000 or even double the amount of the transaction if it is greater. If offenders are found guilty of willful violation, they will have to face a fine of $1 million or 20 years jail time or even both. There are nine other official distributors of Microsoft products in Russia that belong to the same category as that of Merlion and RRC. None of them were willing to disclose if they had also introduced stricter payment rules for Russian firms on the sanctions list.

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