In response to Russia’s continued efforts to destabilize eastern Ukraine, the U.S. Department of the Treasury July 29 imposed prohibitions on additional entities operating within the financial services sector of the Russian economy.
The actions target three banks owned by the Russian state and one defense technology entity also owned by the Russian state.
Specifically, Treasury imposed sanctions that prohibit U.S. persons from providing new financing to three major Russian financial institutions, limiting their access to U.S. capital markets. The department also designated one Russian state-owned defense technology firm.
The measures coincide with actions taken to suspend U.S. export credit and development finance to Russia.
“In light of Russia’s continuing support for separatists in Ukraine, we took additional steps today to further increase financial pressure on the Russian government,” said Under Secretary for Terrorism and Financial Intelligence David Cohen. “These actions, along with actions announced today by the European Union, significantly increase the costs to Russia for its efforts to undermine Ukraine’s sovereignty. We are prepared to continue to expand these sanctions if Russia refuses to change course.”
SANCTIONS ON FINANCIAL INSTITUTIONS
Treasury imposed measures prohibiting U.S. persons and persons within the United States from transacting in, providing financing for or otherwise dealing in new debt of longer than 90 days maturity or new equity for Bank of Moscow, Russian Agricultural Bank and VTB Bank OAO, their property or their interests in property.
As a practical matter, this step will severely limit these banks’ access to medium- and long-term U.S. dollar financing and will impose additional significant costs on the Russian government for its continued activities in Ukraine, according to Treasury.
The United States has not blocked the property or interests in property of these banks, nor prohibited transactions with them beyond these specific restrictions. However, the scope of prohibited activities and the number of sanctioned financial institutions may be expanded.
Bank of Moscow is a Russian state-owned financial institution — through its parent bank, VTB Bank OAO — with 148 suboffices located in all administrative districts of Moscow.
Russian Agricultural Bank (A.K.A. Rosselkhozbank) is a state-owned bank, which acts as a Russian government agent offering a full range of financial services to clients. With a network of 78 regional branches and more than 1,500 additional offices covering Russia, it has the second-largest regional branch network in Russia.
VTB Bank OAO is a state-owned bank, and, together with its subsidiaries (“the VTB Group”), is Russia’s second-largest banking group. The VTB Group has more than 1,600 offices in Russia and operates more than 30 banks in 23 countries across Europe, Asia and Africa. The VTB Group offers financial services including retail, corporate and investment banking; brokering and other stock-market services; insurance; asset management for pension and unit funds; and leasing. VTB Bank’s shares are traded on the Moscow Exchange and on the London Stock Exchange.
SANCTIONS ON DEFENSE TECHNOLOGY ENTITY
On July 29, Treasury also designated and blocked the assets of United Shipbuilding Corporation for operating in the arms or related materiel sector in Russia.
United Shipbuilding Corporation, which was established pursuant to a March 21, 2007, presidential order, is a Russian state-owned company that manufactures, among other things, ordnance and accessories and is engaged in shipbuilding, repair and maintenance. United Shipbuilding Corporation designs and constructs ships for the Russian Navy and is the largest shipbuilding company in Russia. This addition expands upon the list of eight defense technology firms designated on July 16.
As a result of this action, any assets of the entity designated that are within U.S. jurisdiction must be frozen. In addition, transactions by U.S. persons or within the United States involving the entity designated July 29 are generally prohibited.
Identifying information on the entities named above is available on the Treasury website.