As Sino-Russian economic and trade cooperation moves toward the goal of 300 billion US dollars, project cooperation in energy, manufacturing, agriculture and other fields continues to heat up. However, the complex international environment and Russia's local regulatory system also expose Chinese enterprises to multiple compliance challenges. Only by accurately identifying risks and establishing a systematic response mechanism can projects be promoted sustainably.

I. Analysis of Core Compliance Risks

(I) Industry Access and Foreign Investment Control Risks

Russia implements strict access management for fields involving national security and economic lifelines. The "Law on Foreign Investment in Strategic Industries" (No. 57-FZ) clearly specifies foreign investment restrictions in 47 sub-sectors. In the energy sector, only Russian-funded enterprises are allowed to hold controlling stakes in offshore oil and gas exploration, and the shareholding ratio of Chinese state-owned enterprises in strategic mineral projects is limited to less than 25%. In the agricultural sector, foreign individuals are prohibited from directly holding agricultural land and must obtain the right to use it by establishing legal persons in Russia or signing long-term leases (up to 49 years). For manufacturing involving dual-use technologies, strict prior approval is required. Projects that fail to meet access requirements may face penalties such as equity confiscation and license revocation, and may even lead to invalid transactions.

(II) International Sanctions and Secondary Sanctions Risks

After the Russia-Ukraine conflict, large-scale sanctions imposed by Europe and the United States have exposed Chinese enterprises to significant secondary sanctions risks. The SDN list of the US Office of Foreign Assets Control (OFAC) continues to expand, with 22 Chinese entities added in May 2024 due to sensitive transactions involving Russia. If enterprises cooperate with sanctioned entities, supply dual-use materials, or evade controls through re-export via third countries, they may be restricted from US dollar settlement and have their overseas assets frozen. At the same time, Russia's anti-sanctions laws prohibit enterprises from implementing foreign sanctions. If Chinese parties cooperate with European and American restrictions, they may violate local Russian laws, falling into a "dual compliance" dilemma.

(III) Cross-border Transaction and Payment Risks

The US dollar settlement system is under US judicial jurisdiction, and any Russia-related transaction cleared through US banks may trigger sanctions reviews. Some Russian banks have been excluded from the SWIFT system, directly affecting the efficiency of fund transfers. In addition, product exports must meet both China's "Export Control Law" and Russia's EAC certification requirements. Unauthorized export of dual-use items may face fines of up to 10 times the illegal turnover. A machinery company in Chongqing once had its account frozen for receiving payments through a sanctioned Turkish bank, highlighting the importance of compliance in payment links.

(IV) Local Compliance and Contract Performance Risks

Russia's tax, labor, and environmental protection laws and regulations are complex, making enterprises prone to compliance loopholes due to unfamiliarity with the rules. Requirements such as local procurement ratio for manufacturing projects, land ownership verification for agricultural projects, and employment and output commitments in project investment agreements may lead to disputes if the ability to perform is not fully evaluated. At the same time, the existence of "shell companies" in Russia increases cooperation risks, and policy changes may lead to asset seizure risks, further increasing the uncertainty of contract performance.

Ⅱ. Suggestions for Addressing Compliance Risks

(I) Establish a Full-process Access Compliance System

Conduct special legal due diligence, focusing on verifying whether the project belongs to a strategic industry and clarifying core clauses such as foreign investment shareholding ratio and licensing approval requirements.

Design flexible cooperation models. For sensitive fields such as energy and minerals, adopt a joint venture structure controlled by Russian parties, reserving room for equity adjustments to respond to policy changes.

Communicate in advance with Russian competent authorities such as FAS to ensure the compliance of the project approval process and avoid subsequent risks due to procedural flaws.

(II) Build a Sanction Compliance Protection Mechanism

Establish a blacklist screening system, regularly check whether counterparties and end-users are on OFAC and other sanctions lists, focusing on the "50% rule" and the "10% technology proportion rule".

Optimize settlement and logistics solutions, prioritize RMB or ruble settlement (relying on the CIPS system), and file alternative customs clearance channels such as Belarus.

Include sanction exemption clauses in contracts to clarify the division of rights and obligations when performance is impossible due to international sanctions.

(III) Improve Cross-border Transaction Compliance Management

Strictly implement the export licensing system, apply for licenses from China's Ministry of Commerce in advance for dual-use items, and retain end-user commitment letters and purpose certificates.

Promote localized substitution of technologies, increase the self-sufficiency rate of core components (targeting more than 90%), and reduce reliance on restricted technologies.

Establish a full-chain tracking system, implement strict control over transit trade, and require proof of terminal usage scenarios.

(IV) Strengthen Local Compliance and Risk Mitigation

Set up a localized compliance team or hire Russian professional institutions to handle tax declaration, labor contracts, environmental impact assessments and other affairs.

Carefully select partners, prioritize cooperation with local Russian state-owned enterprises and reputable enterprises, and verify the other party's qualifications through notarization and other methods.

Agree on neutral third-party arbitration clauses in contracts, and give priority to Chinese or international neutral arbitration institutions to resolve disputes, reducing the risk of judicial jurisdiction.

(V) Establish a Dynamic Risk Monitoring and Emergency Mechanism

Conduct quarterly compliance "stress tests" to simulate emergency response processes for scenarios such as sanctions and policy changes.

Set up dedicated accounts for Russia-related businesses to realize isolated fund management and avoid risks caused by mixing with other businesses.

Track updates to Chinese and Russian laws and regulations and international sanctions lists in real time to ensure that the compliance system is consistent with the latest requirements.

III. Conclusion

The compliance risks for Chinese enterprises undertaking projects in Russia are complex and dynamic, involving both external pressure from international sanctions and internal constraints from local rules. Enterprises need to embed compliance management into the entire project life cycle, and achieve a balance between commercial interests and compliance security through professional risk identification, systematic response plans and regular compliance monitoring. Against the background of deepening Sino-Russian economic and trade cooperation, compliance has become a core prerequisite for project success. Only by building a solid compliance defense line can enterprises achieve long-term and stable development in the Russian market.