Contractual relations with residents of Ukraine

In connection with the war, Ukraine imposed a number of bans and repealed a dozen international treaties. Let's understand what has changed for businesses from the Republic of Belarus and the Russian Federation.

Transfers

From February 24, banks are prohibited from all cross-border transfers, except as provided by the National Bank of Ukraine. Most exceptions allow transfers in the interests of the government. The only exception left for business is the payment for the import of critical goods and services to Ukraine. The list of it is determined by a government, and includes:

  • food products;
  • energy carriers;
  • defense goods;
  • goods needed by industry and agriculture;
  • medical supplies;
  • payments for license agreements, including royalties;
  • telecommunication services;
  • advertising activities;
  • etc. 

Important: the delivery of such imports should take place after February 23, 2022.

Banks are also prohibited from conducting foreign exchange transactions in the following cases:

  • if the operation is carried out in Russian and Belarusian rubles;
  • the participant of the operation is a legal or natural person who has a location (registered / permanently resident) in the Russian Federation or in the Republic of Belarus;
  • carrying out an operation to fulfill obligations to legal or natural persons who are located (registered / permanently resident) in the Russian Federation or in the Republic of Belarus.

«foreign exchange transactions» mean any payments in foreign currency, or with non-residents.

The last point blocks most transactions under contractual obligations

However, in the case of, for example, replacement of the creditor, or repayment of the guarantor's debt by recourse, payments will be made, because the above criteria are missing.

Also, the NBU resolution of February 24 suspended the implementation of expenditure operations by servicing banks on the accounts of residents of the Russian Federation / Republic of Belarus, on the accounts of legal entities (except banks) whose ultimate beneficial owners are residents of the Russian Federation / Republic of Belarus. There are a number of exceptions to the ban, namely the payment of wages, transfers for the Armed Forces, insurance payments, payment of bank fees and transfers and others.

The National Bank of Ukraine banned transfers using electronic means of payment issued by participants in international payment systems operating in Russia and Belarus by a resolution of March 1. Mirror to this, international payment systems such as Western Union and PayPal have announced the suspension of international transfers to and from Russia.

As a result, it is impossible to trade and pay directly.

Denounced contracts

After February 24, the abolition of agreements with the Russian Federation and the Republic of Belarus intensified in Ukraine. The following agreements and contracts have already been terminated:

  • Agreement between Ukraine and Russia on mutual recognition and equivalence of documents on education and academic titles;
  • Agreement between Ukraine and Belarus on mutual recognition and equivalence of documents on education and academic titles;
  • Agreement between Ukraine and Russia on cooperation in the field of creation and operation of space and rocket technology;
  • Agreement between Ukraine and Russia on cooperation in the field of fisheries;
  • Agreement between Ukraine and Russia on the avoidance of double taxation of income and property and the prevention of tax evasion.

In practice, this means that Ukraine:

  • ceases to recognize documents on education, academic titles and degrees of Russia and Belarus;
  • imposes double taxation on residents of the Russian Federation (ie in case of income, taxes will have to be paid twice - in Ukraine and Russia);
  • refuses to work with the Russian Federation in the field of missile construction and fisheries.
Import and export

The denunciation of the double taxation agreement was a step towards reducing trade with Russia. It is important that this agreement applies not only to imports / exports, but also to persons earning money in a non-resident country. А similar agreement between Belarus and Ukraine has not been canceled.

However, there are a number of general prohibitions on goods and resources. Thus, in order to meet the needs of the natural gas market of Ukraine, the Ministry of Energy of Ukraine banned the export of natural gas from the customs territory of Ukraine, by order №99 of 03.03.2022.

Also, since the beginning of the war, it has been forbidden to export critical raw materials from Ukraine. Some bans have now been lifted, but are still in place for salt, sugar, rye, buckwheat, oats, potash and phosphorus fertilizers.

A number of land customs crossings on the border with the Republic of Belarus and the Russian Federation were closed by the order of the Cabinet of Ministers of February 26, 2022. Customs at airports also do not operate due to enclosed airspace.

The resolution of the Government of Ukraine of April 9, 2022 was an extreme, but not the last, ban on trade relations. It banned all imports from Russia. There is no similar resolution for Belarus. But due to closed checkpoints and sanctions for settlements with residents of the Republic of Belarus, it is almost impossible to continue economic relations.

Summing up

Ukraine is gradually reducing the number of economic and trade ties with the Russian Federation and the Republic of Belarus. The general trend is that the number of bans will only increase.