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The US has issued new sanctions against designated individuals and entities deemed “critical” to Russia’s war effort in Ukraine.
On May 8, the US Office of Foreign Assets Control (OFAC) issued new sanctions against three of Russia’s largest banks: Sberbank; Gazprombank; and Moscow Industrial Bank (MIB).
Sberbank, which holds about a third of all bank assets in Russia, is the country’s largest bank, and is majority owned by the Russian government.
In its latest order, OFAC sanctioned eight current or former members of Sberbank's executive board.
This adds to previous sanctions placed on Sberbank’s CEO and chairman on March 24, and on Sberbank’s first deputy chairman on February 24.
It also builds on two executive orders (14071 and 14024) that sanctioned Sberbank as an entity, by blocking new US investment in the Russian Federation and US provision of services to the defence, technology, financial or any other designated sectors of the Russian economy.
The orders also blocked all US access to property or interests in property deemed to benefit the Russian government.
At Gazprombank, OFAC has sanctioned 27 members of the bank’s board of directors. OFAC has previously sanctioned Gazprombank as an entity on February 24, the day of Russia’s invasion of Ukraine.
According to this directive, US persons or persons within the US territory are prohibited from purchasing or servicing new debt or equity from designated “Russian-related entities”.
Gazprombank, the third largest bank in Russia, is a privately-owned bank with an unclear shareholding structure, according to an anonymous financier quoted by Le Monde.
It was created in 2014 to serve the financial needs of state-owned Gazprom, Russia’s largest producer and exporter of natural gas.
As VIXIO has reported previously, Gazprombank is central to President Putin’s proposed payments solution that would enable Russian gas producers to continue to export to the European Union.
OFAC also sanctioned state-owned bank MIB and ten of its subsidiaries. Since February 22, when OFAC sanctioned Russia’s Promsvyazbank (PSB), MIB was reported to have taken on business on behalf of PSB.
In addition, OFAC said MIB has helped Russia’s Transkapitalbank, another sanctioned entity, to move US dollars and has also facilitated transactions for Russia’s intelligence services.
According to OFAC, MIB owns at least 50 percent or more, either directly or indirectly, of the ten subsidiaries named in its latest order.
Aside from banks, OFAC also sanctioned Promtekhnologiya, a private defence company that produces rifles for Russia’s military and intelligence services, and state-owned TV channels One Russia, Russia-1 and NTV Broadcasting Company.
Service lockout
In addition to targeting designated individuals and entities, OFAC has taken action to restrict access to services that are used by the Russian state and Russian elites to evade sanctions.
The latest additions to these prohibited services include accounting, management consulting and trust and corporate formation.
Effective from June 7, these services can no longer be provided by a US person, wherever located, to any person located in the Russian Federation.
“Today we are further constricting Russia’s economy and access to services and technology it needs to conduct this unprovoked invasion,” said Janet Yellen, secretary of the Treasury.
“Preventing Russia from accessing the United States’ valuable professional services increases the pressure on the Kremlin and cuts off its ability to evade sanctions.
“We are also targeting Putin’s ability to generate revenue that enables his aggression, as well as entities and their leaders who support his destructive actions.”
OFAC noted that wealthy Russians have relied on US expertise to set up shell companies, move wealth and resources to alternate jurisdictions, and conceal assets from authorities.
Russian companies, particularly state-owned and state-backed enterprises, rely on these services to run and grow their businesses, which in turn generates revenue that benefits the Russian state.
UK sends sanctions reinforcements
On the same day as OFAC's announcement, the UK also announced new trade sanctions on Russia and Belarus.
The government will introduce new import tariffs on exports of platinum and palladium from Russia and Belarus.
In 2020, the UK was the world’s largest importer of platinum from Russia, accounting for 36 percent of the country’s total platinum exports.
It is also the world’s largest importer of raw and semi-manufactured palladium from Russia, accounting for 21 percent and 88 percent of the country’s total exports respectively.
According to data from the Observatory of Economic Complexity (OEC), the UK spent about $5.1bn on imports of platinum and palladium from Russia in 2020.
The UK will also introduce an export ban on goods for which Russia is “most dependent” on the UK, including chemicals, plastics, rubber and machinery.
“This far-reaching package of sanctions will inflict further damage on the Russian war machine,” said Anne-Marie Trevelyan, secretary of state for international trade.
“It is part of a wider coordinated effort by the many countries around the world who are horrified by Russia’s conduct and determined to bring to bear our economic might to persuade Putin to change course.”
“Over £4bn worth of goods will now be subject to import and export sanctions, doing significant damage to Putin’s war effort,” said Rishi Sunak, chancellor of the exchequer. “Working closely with our allies we can and will thwart Putin’s ambitions.”
In a press statement, the UK Department for International Trade (DIT) said its latest sanctions package will bring the proportion of UK imports from Russia hit by restrictions to more than 96 percent.
As for UK exports to Russia, more than 60 percent are now subject to whole or partial restrictions.
Legislation must first be prepared to impose the new restrictions. In the meantime, the DIT has encouraged all UK firms that use Russian imports to source alternative supplies.
