Two of Microsoft’s official distributors in Russia have imposed restrictions on sales of Microsoft software to more than 200 Russian companies following new US sanctions, according to notifications circulated by the distributors.
While much of the focus around US sanctions has been on ways they are being skirted, the moves by the Russian distributors show how tougher restrictions that came into force on November 28 are starting to bite.
The new measures cut the duration of loans that can be offered to Russian financial firms subject to sanctions to 14 days from 30 days and to 60 days from 90 days for Russian energy companies on a US sanctions list.
Previously, the restrictions had mainly affected Western banks lending to Russian firms but with such short financing periods, swathes of companies supplying goods and services to Russian clients fear they could fall foul of the rules too.
It is routine in Russia for suppliers to wait weeks or even months to get paid after submitting invoices for goods and services.
Some Western firms have been advised by lawyers that the US Treasury Department could, in theory, take the view this constituted financing in violation of the sanctions, according to several people involved in the discussions.
One of the two Microsoft distributors, a Russian company called Merlion, said in its notification to partners that all sanctioned buyers of Microsoft licences must pay within tight deadlines, or even pay upfront in some cases.
The second distributor, RRC, said in its notification, seen by Reuters, that “serious restrictions are being introduced” on Microsoft orders from firms subject to US sanctions.
Both Merlion and RRC cited rules stemming from the new package of US sanctions – signed into law on August 2 for Russia’s involvement in Ukraine and cyber attacks – as the reason for the additional restrictions.
Neither Merlion nor RRC responded to Reuters questions.
Microsoft said in a statement to Reuters: “Microsoft has a strong commitment to complying with legal requirements and has robust processes around the world to help ensure that our partners are in compliance as well.”
In response to Reuters questions, a spokesman for the US Treasury Department, which oversees the enforcement of sanctions, referred to its published guidance.
The guidance from the Treasury’s Office of Foreign Assets Control (OFAC) states that US firms can conduct transactions with companies on the sanctions list as long as the payment terms do not exceed the permitted loan duration.
“In the event that a US person believes that it may not receive payment in full by the end of the relevant payment period, the US person should contact OFAC to determine whether a licence or other authorization is required,” it said.
The US can impose a civil penalty on violators of $250,000 or double the amount of the offending transaction if it is greater. If convicted of wilful violation, offenders face a fine up to $1 million, or 20 years in jail, or both.
Microsoft did not respond to Reuters questions about whether it had initiated the restrictions introduced by two of its Russian distributors.
Microsoft lists nine other official distributors of its main software products in Russia in the same category of partner companies as RRC and Merlion. One, Softline, declined to comment on whether it had introduced stricter payment rules. The others did not respond to Reuters requests for comment.
Reuters reported in October that software produced by Microsoft had been acquired by state organisations and firms in Russia and Crimea, despite sanctions barring US-based companies from doing business with them.
That case, and several similar ones reported by Reuters, highlighted gaps between the sanctions and their enforcement.
The US government operates two lists of firms subject to sanctions. US-based entities are banned from doing almost all forms of business with firms on Washington’s Specially Designated Nationals (SDN) list.
A second list known as the Sectoral Sanctions Identifications (SSI) list covers 224 mostly Russian firms and their subsidiaries in the banking, energy and defence sectors which are subject to financial restrictions.
They include major Russian companies such as oil giant Rosneft, natural gas producer Novatek and Sberbank, Russia’s biggest lender.
While the lending rules for financial and energy firms have been tightened, restrictions on financing for Russian defence manufacturers were left unchanged at 30 days though the new sanctions toughened the penalties for any violations.
The notification from Microsoft distributor Merlion dated November 29, the day after the new lending rules come into force, said orders would only be fulfilled for financial sector buyers once it had confirmation full payment had been received.
For the defence sector, it said orders would be fulfilled only if partners confirmed payment would be made within 30 days of the software licence being activated. For energy sector clients, confirmation of payment within 60 days was required.
“If we do not receive from you documents confirming payment on orders from the defence and energy sectors, the order could be viewed by the vendor as not complying with the processing procedure and rejected,” Merlion’s notification said.
RRC did not spell out the new restrictions in its notification, sent by e-mail last month to its partners.