United States and Its Allies Move to End Normal Trade Relations With Russia
On March 11, President Biden announced that the United States, along with the Group of Seven (“G7”) and the European Union, is taking action to deny Russia most-favored-nation (“MFN”) status, a move that will significantly increase the costs of importing Russian goods.
MFN status means that the receiving nation is granted all trade advantages, such as low tariffs, that any other nation receives.
Russia received MFN status in 2012 when it joined the World Trade Organization (“WTO”). The WTO requires normal trade relations between member countries. Denying Russia MFN status thus creates conflicts with member obligations to extend nondiscriminatory treatment to imports of other member country goods.
In the United States, MFN has also been referred to as permanent normal trade relations (“PNTR”). In his announcement from the White House, President Biden remarked:
Revoking PNTR for Russia is going to make it harder for Russia to do business with the United States. And doing it in unison with other nations that make up half of the global economy will be another crushing blow to the Russian economy that’s already suffering very badly from our sanctions.
President Biden also explained that U.S. action to revoke Russia’s PNTR status will involve the timely passage of bipartisan legislation and further actions in unison with U.S. allies.
The latest actions against Russia are part of the unprecedented and escalating multilateral response to Russia’s invasion of Ukraine. To date, the U.S. response includes:
- A ban on imports of Russian vodka and other alcohol, seafood, and non-industrial diamonds.
- A ban on imports of Russian oil, liquified natural gas, and coal.
- A ban on exports of luxury goods to Russia.
- New restrictions on exports of microelectronics, computers, telecommunications equipment, and other items to Russia.
- New restrictions on reexports of foreign-produced items made from certain U.S. origin software, technology, or plant equipment.
- Expanded restrictions on exports involving Russian oil and gas production and other critical industry sectors.
- Blocking measures against Russian President Vladimir Putin and select government officials, oligarchs, state-owned banks, investment funds, and any entities that are owned 50% or more by them.
- Removing select Russian banks from the SWIFT messaging system.
- Severing correspondent and payable-through accounts with Sberbank, Russia’s largest bank, thereby preventing any U.S. dollar transactions with Sberbank.
More trade controls and sanctions are expected as calls for a ceasefire, humanitarian relief, and diplomacy continue. We are closely monitoring the situation and are available to advise on how the changes impact existing contracts and operations.
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