In an extremely rare move, Singapore's Minister for Foreign Affairs Mr Vivian Balakrishnan, announced in parliament on 28 February 2022 that Singapore would be imposing sanctions against Russia unilaterally and notwithstanding the absence of any binding UN Security Council decision or direction.
It is believed that the last time Singapore had acted on its own in imposing sanctions against another country was over four decades ago, after the Vietnamese invasion of Cambodia in 1978.
However, given the unprecedented gravity of the Russian attack on Ukraine and the unsurprising veto by Russia of the draft Security Council resolution in relation to the attack on Ukraine, Singapore has felt it necessary to take action.
Singapore is the only ASEAN country so far to have announced sanctions against Russia. While ASEAN has so far issued a joint statement calling for, "an immediate ceasefire or armistice and continuation of political dialogue that would lead to sustainable peace in the Ukraine", it is not yet clear if any of the other ASEAN countries will go further and impose sanctions.
Singapore's Sanctions against Russia
On 5 March 2022, Singapore Ministry of Foreign Affairs announced details of Singapore's new sanctions against Russia.
The sanctions which aim to constrain Russia's capacity to conduct war against Ukraine and undermine its sovereignty fall within two broad categories:
- The imposition of export controls on items that can be directly used as weapons to inflict harm on or to subjugate the Ukrainians, and items that can contribute to offensive cyber operations.
- The imposition of financial measures targeted at designated Russian banks, entities and activities in Russia, and fund-raising activities benefiting the Russian government.
Singapore's Strategic Goods (Control) Act (SGCA) regulates the trade in strategic goods and related technology that can be used to produce weapons of mass destruction, and missiles capable of delivering such weapons. Such goods includes arms and military equipment, and "dual use" commercial items that could be used in the development of weapons of mass destruction. Under the SGCA, the export, transshipment or transit of any strategic goods or the transmission of any strategic goods technology is prohibited unless a permit is first obtained from the Director-General of Customs.
Items subject to strategic goods control are listed in the Strategic Goods (Control) Order (SGCO) 2021. The Schedule to the SGCO divides strategic goods into two broad categories: "Military Goods" (which includes arms, explosives, armoured equipment etc.) and "Dual-Use Goods" (which covers certain goods falling within the sub-categories set out in the Schedule).
Under Singapore's new sanctions against Russia, the Director-General of Customs will reject all permit applications for the export (and transit / transshipment) of the following strategic goods:
- All items on the List of Military Goods under the SGCO
- All items with category codes Category 3 - Electronics; Category 4 - Computers and Category 5 - Telecommunications / Information Security on the List of Dual-Use Goods.
Singapore has announced that it will be placing the restrictions detailed below on all financial institutions in Singapore - including banks, finance companies, insurers, capital markets intermediaries, securities exchanges and payment service providers. The Monetary Authority of Singapore which regulates financial institutions in Singapore is expected to issue more detailed directions in the coming days.
According to the Ministry of Foreign Affair's announcement, Singapore financial institutions will be prohibited from participating in the following activities:
- Entering into transactions or establishing business relationships with the following Russian banks:
- VTB Bank Public Joint Stock Company;
- The Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank;
- Promsvyazbank Public Joint Stock Company; and
- Bank Rossiya.
Where there are existing business relationships, financial institutions must freeze any assets and funds of these four banks.
- Providing financing or financial services in relation to the export from Singapore or any other jurisdiction of strategic goods which are subject to Singapore’s new export controls on Russia (as outlined in the preceding section on Export Controls).
- Providing financial services in relation to designated Russian non-bank entities which are involved in the export of the specified strategic goods from Singapore or any other jurisdiction. Where there are existing business relationships, financial institutions must freeze any assets and funds of these designated entities. Note that Singapore has not yet named the sanctioned / designated Russian non-bank entities to which this prohibition applies.
- Entering into transactions or arrangements, or providing financial services that facilitate fund raising by:
- The Russian government;
- The Central Bank of the Russian Federation;
- Any entity owned or controlled by them or acting on their direction or behalf.
The prohibitions apply to buying and selling new securities, providing financial services that facilitate new fund raising by, and making or participate in the making of any new loan to the above entities.
The Singapore Government and Monetary Authority of Singapore will also cease investing in newly issued securities of the above entities.
- Entering into transactions or providing financial services in relation to the following sectors, in the breakaway regions of Donetsk and Luhansk:
- Energy; and
- Prospecting, exploration and production of oil, gas and mineral resources.
- Entering into or facilitating any transactions involving cryptocurrencies, to circumvent any of the above prohibitions. The prohibited cryptocurrency transactions cover all transactions that involve cryptocurrencies and extend to the payment and settlement of transactions that relate to digital assets (such as non-fungible tokens).
As a major independent financial hub, Singapore's sanctions on Russian banks and Russian related financial transactions could play a role in limiting Russia's ability to circumvent sanctions already being imposed by the US and the EU.
The imposition of export controls could also have an impact on Russian trade in strategic goods (particularly in relation to sanctioned "dual-use" goods), as Singapore's export controls also extends to sanctioned goods transshipped / transiting in Singapore and to the provision of financing of the export of such goods to Russia by Singapore financial institutions - even where the goods do not originate from Singapore.
While there is no blanket prohibition against all Russian related business and Singapore's sanctions remain targeted at specified entities and sectors, financial institutions in Singapore are no doubt taking a cautious approach. It is understood that even before Singapore had announced any sanctions, a number of Singapore's largest banks had already restricted trade financing for Russian commodities because of the war in Ukraine and the uncertainties over sanctions.
As further sanctions related directions and developments are to be expected over the coming days, we will continue to monitor the situation and provide further updates.