Is a Special Purpose Vehicle a Way to Circumvent Western Economic Sanctions Imposed on Russia or Only Pitfalls Lie Ahead?

The ‘problem’ of economic sanctions that restricted trade has vexed the Russian community for the past several years and seemingly only tends to worsen. At the same time, the European Union (the EU) developed a Special Purpose Vehicle (the SPV) (known as Instrument in Support of Trade Exchanges (the INSTEX) for Iran to continue trade without accessing the United States financial system and avoid violating the United States of America (the US) sanctions. In this respect, one might argue that Russia, in general, might consider a similar option by creating an INSTEX like SPV to circumvent the imposed economic sanctions. At first glance, such SPV seems like a working mechanism to continue the trade in goods and services and to preserve trade flows in case Russia is fully disconnected from the SWIFT) or if ‘maximum’ sanctions are imposed against Russia. This article provides a general overview of how Russia deals with trading under the pressure of economic sanctions and how the hypothetical SPV may assist Russia in maintaining stable trade relations despite the sanctions. The article further discusses how the hypothetical SPV may resort to investment arbitration in order to protect its rights and interests and challenge the imposed sanctions and the risks it may face in this respect. The study reveals that creating such SPV to avoid anti-Russian sanctions might assist with humanitarian need, while the potential to restore normal trade flows is quite doubtful. Special Purpose Vehicle (SPV), Economic Sanctions, Investment Arbitration, Instrument in Support of Trade Exchanges (INSTEX), Counter-sanctions, Circumventing sanctions