New U.S. Sanctions Target Sberbank and Alfabank: Banking Sanctions Update for April 4 – 10, 2022
4/4/2022
The United States announced a new round of sanctions Wednesday, targeting Russian banks and family members of the country’s leadership, in response to what the White House called "major war crimes."
The new sanctions target Russia's Sberbank and Alfabank, the country's second and fourth largest financial institutions, respectively.
Reuters noted that the full blocking sanctions “will freeze Sberbank and Alfabank's assets ‘touching the U.S financial system,’ the White House said. Britain also froze Sberbank's assets, and said it would ban imports of Russian coal by the end of this year as part of a coordinated allied effort to ‘starve Putin's war machine.’”
In addition, the U.S. is banning Americans from investing in Russia, and also sanctioned Russian President Vladimir Putin's two adult daughters, Russian Foreign Minister Sergei Lavrov's wife and daughter, and senior members of Russia's security council.
Sberbank released a statement in response, saying the new sanctions “will not have a significant impact on the bank's operations and will not affect service to Russians as the system has already adapted to the previous restrictions."
Related sanctions news for Thursday, April 7:
- Banks Push Brussels for Clarity to Avoid ‘Over-Compliance’ with Sanctions on Russia (Financial Times)
- S. FBI Says it Foiled a Cyberattack by Russian Hackers (International Business Times)
- Japan to Unveil Further Sanctions on Russia After Coordinating with G7, PM Says (International Business Times)
Russia said Wednesday it sent $650 million in bond payments on dollar bonds in rubles to the National Settlement Depository.
Russia's Finance Ministry said it believes its obligations "have been fulfilled in full." after foreign banks had refused to process the payment, which was due Monday, in dollars.
According to Business Insider, “ratings agencies have said they would consider Russia to have technically defaulted if it resorted to paying dollar-denominated debts in rubles. Credit ratings agency Fitch said in March that a ‘forced redenomination of payment obligations’ would indicate "that a default or default-like process has begun." Fitch has since withdrawn all Russian ratings.”
The payments were for bonds maturing this month and for a coupon on notes due April 2042. As Bloomberg notes, “neither security allowed Russia the option to pay in rubles, according to bond documents, raising investor concern that the country is at risk of a default. Both notes have a 30-day grace period, data compiled by Bloomberg show.”
The U.S. and E.U. are expected Wednesday to announce new sanctions targeting Russian banks, Russian coal, and possibly President Putin’s family.
Related sanctions news for Wednesday, April 6:
- Yellen to Warn of Economic Repercussions from Ukraine Invasion (New York Times)
- S., Allies Ready New Russian Sanctions After Bucha Killings (International Business Times)
- VTB Bank to Seek Administration for U.K. Unit After Sanctions (Bloomberg)
On Tuesday, the U.S. Treasury announced it had halted dollar debt payments from Russian government accounts at U.S. banks.
As Fortune noted, “The move is designed to force Russia into choosing among three unappealing options — draining dollar reserves held in its own country, spending new revenue, or going into default, said a spokesperson for the Treasury’s Office of Foreign Assets Control who discussed details of the decision on condition of anonymity.”
In mid-March, Russia was up against a March 16 deadline to pay $117 million in interest on two dollar-denominated bonds. But on March 17, the Russia's government said the debt payment was made in a foreign currency, without revealing which currency.
On Tuesday, Andrey Kostin, CEO of No.2 lender VTB, said that Russian banks would need more recapitalization.
According to Reuters, Kostin said Tuesday, "I don't know yet where the capital boost will come from but it will come for sure. Not only for VTB but for the wider banking sector, I think." Kostin also said he expected the financial sector to post losses this year.
Related sanctions news for Tuesday, April 5:
- Russia Poses ‘Multi-Layered Risks’ for Swiss Banks, Finma Says (Bloomberg)
- Japan MOF Panel Recommends Revoking Russia's Most-Favored-Nation Status (Reuters)
- Germany Is Under Pressure to Ban Russian Natural Gas, but Deutsche Bank’s CEO Says Cutting Supply Would Send the Country Into a ‘Virtually Unavoidable’ Recession (Business Insider)
On Monday, April 4, JPMorgan chief executive Jamie Dimon highlighted the array of risks facing the U.S. economy in his annual shareholders letter, citing inflation, rising interest rates, the lingering pandemic, and Russia’s invasion of Ukraine as factors that challenge global markets.
"While it is possible, and hopeful, that all of these events will have peaceful resolutions, we should prepare for the potential negative outcomes,” Dimon wrote.
Dimon specifically acknowledged global sanctions against Russia "at a minimum, will slow the global economy — and it could easily get worse."
"Along with the unpredictability of war itself and the uncertainty surrounding global commodity supply chains, this makes for a potentially explosive situation," Dimon added.
Related sanctions news for Monday, April 4:
- Secondary Sanctions: Unilateral Escalation by U.S. Would Lack Punch (FT)
- Deutsche Bank CEO Sees German Recession if Russian Gas Cut Off (Bloomberg)
- Russia's Largest Bank Silently Rolled Out Native Cryptocurrency Sbercoin (International Business Times)