MARCH 2026 | 1ST EDITION | CONSTRUCTION LAW

OIL, SANCTIONS, AND COMMERCIAL EXPOSURE

Managing Legal Risk in Volatile Markets
Conflict does not affect only the battlefield. It also reshapes markets, disrupts trade flows, and creates legal consequences that extend far beyond the states directly involved. Among the most immediate and commercially significant effects are those felt in energy markets and through sanctions regimes, both of which can have a direct impact on businesses operating across borders.

For South African businesses, these developments are not merely a geopolitical background. They can affect pricing, supply chains, financing arrangements, contractual performance, and regulatory compliance. In an increasingly interconnected economy, the economic consequences of conflict often become legal and commercial risks that require careful management.

JBCC

OIL MARKETS & THE LEGAL CONSEQUENCES OF INSTABILITY

Oil remains one of the most strategically sensitive commodities in the global economy. Where conflict affects major producing regions, shipping routes, or refining capacity, the result is often immediate volatility in price and supply. Even when physical supply is not interrupted, uncertainty alone can significantly alter markets.

This volatility has legal consequences. Rising energy prices may affect the viability of long-term supply agreements, transport arrangements, and procurement contracts. Delays, cost increases, and restricted access to key inputs can place pressure on contractual obligations and may give rise to disputes regarding performance, pricing, and allocation of risk.

In sectors that depend heavily on fuel, imported goods, or international logistics, the knock-on effects can be substantial. Businesses may find that events taking place far beyond South Africa’s borders have an immediate bearing on local commercial operations.

THE EXPANDING ROLE OF SANCTIONS REGIMES

Sanctions have become one of the principal legal tools through which states respond to conflict. They are used to apply economic and political pressure without direct military intervention, and may target states, sectors, entities, individuals, or specific forms of trade. Sanctions may take various forms, including:

Asset freezes
Trade embargoes
Export controls
Restrictions on financial transactions
Measures directed at shipping, insurance, or energy-related services

Some sanctions are imposed multilaterally through the United Nations. Others are imposed unilaterally by individual states or regional bodies. In practice, the legal and commercial effect of sanctions often extends beyond the jurisdiction in which they originate, particularly where global banking systems, reserve currencies, or multinational counterparties are involved.

This means that businesses may be exposed to sanctions-related risk even where they are not incorporated in the sanctioning state and are not dealing directly with a listed party.

EXTRATERRITORIAL RISK AND INDIRECT EXPOSURE

One of the most challenging aspects of sanctions compliance is that exposure is often indirect.

A South African company may, for example, enter into a transaction that appears lawful under domestic law, but encounter difficulty because a foreign bank refuses to process payment, an insurer declines cover, or an international supplier withdraws from the arrangement. The practical effect is that foreign sanctions regimes and market practice can shape commercial outcomes even where they are not directly binding as a matter of South African law.

This creates a layered compliance environment in which businesses must consider:

The identity of counterparties and beneficial owners
The jurisdictions through which payments are processed
The currencies used in transactions
The role of foreign service providers, logistics partners, and financiers

In this environment, legal permissibility and commercial feasibility are not always the same thing.

CONTRACTUAL PRESSURE IN TIMES OF CONFLICT

Conflict-related disruption often tests the resilience of commercial contracts. Where sanctions are introduced or market conditions deteriorate rapidly, parties may find themselves unable to perform in the manner originally contemplated. This raises a number of legal questions:

Does the contract contain a sanctions clause?
Is there a force majeure provision that applies?
Has performance become unlawful, or merely more expensive?
Who bears the risk of delay, non-delivery, or regulatory change?

The answer will depend on the wording of the agreement, the governing law, and the nature of the intervening event. Businesses should be cautious about assuming that conflict, sanctions, or market volatility will automatically excuse non-performance. In many cases, the contractual position is narrower than commercial parties expect.

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DID YOU KNOW?

Sanctions risk is frequently driven as much by private-sector compliance as by formal legal prohibition. Banks, insurers, freight providers, and multinational counterparties often adopt internal risk policies that are stricter than the minimum legal requirement, which can significantly affect whether a transaction can proceed in practice.

SOUTH AFRICA'S COMMERCIAL POSITION

For South African businesses, the risks arising from conflict are often felt through global systems rather than direct legal prohibition at home. Participation in international trade, reliance on correspondent banking, and engagement with foreign suppliers and customers all increase exposure to external regulatory developments.

This places businesses in a complex position. A transaction may be lawful under South African law, but still create difficulty where international financial institutions or commercial partners are unwilling to support it. As a result, risk assessments must go beyond domestic legal analysis and take account of the broader commercial environment in which the business operates.

This is particularly relevant in sectors such as energy, mining, manufacturing, shipping, agriculture, and financial services, where cross-border exposure is often unavoidable.

WHY THIS MATTERS FOR BUSINESSES

The economic consequences of conflict can quickly become legal and operational challenges for business. Key areas of concern include:

Sanctions exposure across multiple jurisdictions
Supply chain disruption affecting availability, timing, and cost
Contractual disputes arising from delays, price shocks, or non-performance
Reputational risk associated with high-risk counterparties or jurisdictions
Financing and payment difficulties linked to international compliance controls

An understanding of these issues is essential for effective risk management, particularly where businesses operate internationally or rely on globally integrated markets.

JBCC

NEED SPECIFIC GUIDANCE?

In next week’s edition, we explore the role of international courts and tribunals in enforcing legal accountability, and consider the practical limits of legal remedies in an increasingly politicised global environment.

If you would like assistance assessing your exposure to international legal or sanctions-related risks, please contact our team.

Call: 010 001 2002

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