Global Business Restructuring Under Sanctions

Global Business Restructuring Under Sanctions


At present, Russian companies with the branches in the so-called unfriendly countries face a host of problems such as the blocking of assets and accounts, the impossibility of chartering ships and insuring shipments.

In addition, foreign suppliers can refuse to send goods to Russia. To change the status quo in our favor, it is important to change the jurisdiction of business.

For example, some countries are already building parallel organizations that are not formally associated with Russia. In this sense, it is worth paying attention to such states as Qatar, Saudi Arabia, Macao and Indonesia.

As for financial and holding activities, special administrative zones on the islands of Russky in Primorye and Oktyabrsky in Kaliningrad are suitable for this purpose. The most suitable structures for trading are located in the UAE, Hong Kong and China. Unfortunately, Turkey has disadvantages in this sense due to high inflation and unstable legislation, and there are the exorbitant taxes in Israel. That is why experts suggest “combining” countries. For example, registering in Hong Kong, opening accounts in banks in China, and working in the UAE.

However, it is essential to recall that in the case of the holding company, there is a risk of cooling relations between Russia and each of the above countries, so when choosing to move the business, one should consider the possibility of free opening a bank account, transferring the company from one country to another, currency control requirements and the political position in the proposed state for doing business.

In addition, the departure of Russian groups from traditionally popular jurisdictions in Europe can turn into costs, because they have an exit taxation, as well as added fees for legal, tax and auditing specialists to accompany this process, which on average can take up to six months.

Of course, the question of the tax efficiency of companies cannot help but arise, because the use of an alternative jurisdiction with the accumulation of profits (without the presence of staff there) will have to justify already the Russian tax authorities. In case personnel are still planned to be relocated, it is necessary to calculate payroll taxes.

As for the cargo and goods deliveries, not only has the logistics industry not yet gotten rid of the problems caused by the COVID-19 pandemic, new ones have suddenly appeared. Andrei Semyonov, Head of PwC's supply chain management consulting practice, told the media that the main transportation constraints are primarily related to container shortages, shipping risks due to military action, and COVID-19-related restrictions on the supply of goods from China.

In fact, in CIS and Asian routes, the shortages are mainly due to the limited capacity of rail infrastructure and border crossings. In addition, the transportation of some goods is limited by sanctions imposed on Russia in the sector of air fleet leasing for cargo shipments.

According to Semenov, in terms of the “long-term perspective” it makes sense for businesses to start developing “cross-border, logistics and production infrastructure” in the direction of the Azov-Black Sea basin, the Caucasus, the Middle East, Central Asia and Southeast Asia to “build hubs,” simplify customs processing and negotiate “special terms.”

Several packages of various anti-Russian sanctions have already been imposed by the European Union, the United Kingdom, the United States, and some other countries. State companies and their executives, major banks, billionaires, MPs, politicians, and personally Russian President Vladimir Putin have fallen under the restrictions.

So, the crisis caused by the anti-Russian sanctions imposed in connection with the announced military special operation in Ukraine will be long and tough. However, despite the current situation, businesses need to step up and restructure their production and logistics, which will help them to start working in the new realities as soon as possible.

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