U.S. sanctions, imposed by the Treasury Department’s Office of Foreign Assets Control, apply to Americans and companies registered there. For European banks transacting with Russian companies, any work with a blacklisted entity needs to steer clear of their U.S. units, not involve any Americans wherever they work, and not be done in U.S. dollars.
Raiffeisen Bank International AG, the third-biggest western lender in Russia by assets, is still analyzing the sanctions and can’t comment on a possible impact yet, said Christof Danz, a spokesman for the Vienna-based bank.
Marie-Anne Barbat-Layani, chief executive officer of the French banking federation, told reporters in Paris yesterday. “We’re going to turn to the authorities to know what we’re supposed to do.”
The sanctions come as travel bans and asset freezes aimed at President Vladimir Putin’s inner circle failed to force the country to meet an ultimatum to end support for separatists in two mainly Russian-speaking regions in eastern Ukraine.
Russia and Ukraine blamed each other for the downing of a Malaysia Airlines jet yesterday that killed all 298 people on board in an incident that may prove to be a turning point in the five-month conflict between their countries. The U.S. said this week that Russia is supplying the rebels with weapons.
European sanctions are “dependent on the outcome of the independent international commission that’s likely to be set up to investigate the downing of the airplane,” Hung Tran, executive managing director of the Washington-based Institute of International Finance said by phone today.
“If it’s clear that Russia bears responsibility for supplying weapons to the rebels, sanctions from the EU could be more extensive and steeper than what we have seen so far,” he said.
The EU on July 16 blacklisted Russian companies and halted lending for investment projects in the country, though the measures are less severe than those of the U.S. The EU’s stance on sanctions remains that of this week’s summit, an EU official said today.
“The Europeans tend to hold back a bit on sanctions,” Andreas Plaesier, a banking analyst at M.M. Warburg, said by phone from Hamburg. “If the separatists shot down that plane with weapons from Russia, they’ll be under pressure to take a stricter tack.”
Banks active in Russia “must be hyper-vigilant to the breadth of U.S. sanctions in making sure that no U.S. citizens are in any way connected to these transactions,” said Michael O’Kane, a London-based lawyer at Peters & Peters LLP. “Recent events have shown there’s a lot to lose.”
U.S. regulators punished BNP Paribas after it admitted to violating the International Emergency Economic Powers Act and the Trading with the Enemy Act by processing banned transactions involving Sudan, Iran and Cuba. France’s largest bank will be barred from U.S. dollar-clearing operations for one year beginning Jan. 1 for its oil and gas commodity-finance business and 13 executives will be required to leave the company.
“The risk of getting caught up in activities that will later be subject to sanctions is high, even for banksthat aren’t officially affected,” said Regis Chatellier, a senior strategist in emerging markets sovereign credit at Societe Generale. “Banks may adopt a very cautious approach.”