By Anthony Marcus, for Eurasia Business News – February 22, 2022 – Update on February 24, 2022.
The US Treasury, in compliance with the decision of US President Joe Biden, imposed sanctions on Russian banks Vnesheconombank (VEB), Promsvyazbank (PSB), and 42 of their subsidiaries, reported a press release.
OFAC designated these two financial institutions as they are crucial to financing the Russian defense industry, as well as 42 of their subsidiaries. These financial institutions play significant roles in the Russian economy, holding combined assets worth tens of billions of dollars.
The restrictive measures are US response to the official recognition by Russia on February 21 of the sovereignty of the Donetsk and Luhansk People’s Republics (DPR and LPR) and in response to Moscow’s decision to deploy Russian troops in these regions “to keep peace.”
Targeted individuals
US Treasury also designated influential Russians and their family members in Putin’s inner circle. The sons of Aleksandr Bortnikov (Director of FSB), Sergey Kiriyenko and Mikhaïl Fradkov were included in the US blacklists :
Denis Aleksandrovich Bortnikov, currently a Deputy President of Russian-state owned financial institution VTB Bank Public Joint Stock Company (VTB Bank) and a Chairman of the VTB Bank Management Board.
Petr Mikhailovich Fradkov (Petr Fradkov), the Chairman and CEO of PSB. Petr Fradkov is also the son of Mikhail Efimovich Fradkov (Mikhail Fradkov), former Prime Minister of Russia and former Director of the Russian Foreign Intelligence Service (SVR).
Vladimir Sergeyevich Kiriyenko, son of Sergei Vladilenovich Kiriyenko, who is currently the First Deputy Chief of Staff of the Presidential Office. Sergei Kiriyenko is reported to be Putin’s domestic policy curator. Previously, Sergei Kiriyenko served as the Prime Minister of the Russian Federation and as the General Director of Rosatom State Atomic Energy Corporation.
Targeted Russian banks
The Russian bank Vnesheconombank and 25 of its subsidiaries in the Russian Federation and third countries fell under US sanctions. This was reported in a press release from the Russian Ministry of Finance.
According to the OFAC press release, Vnesheconombank is controlled, and also “directly or indirectly” carries out activities “in the interests of or on behalf of” the Russian government. Together with the bank itself, 25 of its subsidiaries in Russia and third countries fell under US sanctions. In particular, the restrictions affected Bank BelVEB OJSC operating in Belarus, Prominvestbank (Ukraine), and VEB Asia Limited (operating in Hong Kong).
VEB and PSB are state-owned institutions that play specific roles to prop up Russia’s defense capability and its economy, reported OFAC. VEB’s $53 billion asset portfolio makes it large enough to be among Russia’s top five financial institutions, according to US Treasury. VEB occupies a unique role in Russia’s financial system as the servicer of Russia’s sovereign debt, financier for exports, and a funding source for investment projects with a loan portfolio of over $20 billion.
These sanctions ensure VEB and PSB can no longer do business in the United States and are cut off from the U.S. financial system. All assets under U.S. jurisdiction will be immediately frozen and U.S. individuals and entities are prohibited from doing business with these institutions unless authorized by OFAC.
US authorities have imposed sanctions on five commercial vessels owned by PSB Leasing, a subsidiary of Promsvyazbank (PSB). Sanctioned ships include two container ships, Fesco Magadan and Fesco Moneron, two oil tankers, Linda and Pegas, and the cargo ship Baltic Leader. All vessels sail under the Russian flag, their total tonnage is almost 148,000 tons.
Promsvyazbank said on February 24 that for now, customers can pay using ApplePay, GooglePay and SamsungPay services, but due to previously imposed sanctions, they may be turned off. In this regard, the clients of the credit institution were offered to switch to the Russian MirPay service.
The five vessels are owned by PSB Lizing OOO, a designated subsidiary of PSB. All five vessels were identified pursuant to E.O. 14024 as blocked property in which PSB Lizing OOO has an interest.
- Baltic Leader (IMO: 9220639), a Russian-flagged roll-on roll-off cargo vessel with a gross registered tonnage of 8831;
- Linda (IMO: 9256858), a Russian-flagged crude oil tanker with a gross registered tonnage of 61991;
- Pegas (IMO: 9256860), a Russian-flagged crude oil tanker with a gross registered tonnage of 61991;
- Fesco Magadan (IMO: 9287699), a Russian-flagged container ship with a gross registered tonnage of 7519; and
- Fesco Moneron (IMO: 9277412), a Russian-flagged container ship with a gross registered tonnage of 7519.
Central Bank, Ministry of Finance, FNB RF
US OFAC also increased restrictions on dealings in Russia’s sovereign debt, further cutting Russia off from sources of revenue to fund its government or President Putin’s priorities. These restrictions significantly cut off a core way for Russia to raise money. This kind of measure creates a strain on resources for the Russian state and greater risk for its ability to manage its finances.
The Russian central bank, the Russian Federal Ministry of Finance and the National Welfare Fund of Russia on Tuesday were included in the special list of the US financial department, the Non-SDN Menu-Based Sanctions (NS-MBS) list, whose defendants are subject to special financial restrictions.
This list differs from the usual sanctions lists of the Office for Foreign Assets Control (under the US Department of the Treasury), which include financial institutions. The NS-MBS list includes institutions against which “less than full blocking sanctions” are imposed, unlike regular lists.
Read also : US President Joe Biden announced new sanctions against Russia
The United States allowed a number of transactions with VEB to service bonds issued before March 1, 2022 by the central bank, the National Welfare Fund, and the Ministry of Finance of the Russian Federation.
The US Treasury has set a deadline for completing all transactions with VEB and its subsidiaries by March 24, 2022.
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So, here is the question: how much of the Russian assets are actually being affected by the U.S. freezing funds? Do those banks really have that much invested in the U.S. or is this just virtue signaling?
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