Do you do business with a sanctioned country? Then you’ll be impacted. Easy enough.

Microsoft isn’t doing business with a sanctioned country in this case. That, yet again, is my point. You keep conflating Microsoft with the company actually breaching the EU sanctions.

Microsoft are absolutely being punished - they were forced to make choice between “doing business in the EU” (what exactly the EU threatened is unclear to me) or losing the contract value, plus whatever they may incur in damages though breach of contract.