US Treasury Sanctions Gazprombank, 40 Other Entities

The US government on Thursday placed the Russia’s private-owned Gazprombank, the third largest bank in the country with assets around $860 million and one of the main channels for payments for Russian oil and gas, under sanctions. Australia, Canada, New Zealand and Britain have previously sanctioned Gazprombank.

With the latest sanctions, Gazprombank has joined 50+ small to medium financial institutions in Russia which are under sanctions, after Russia Invaded Ukraine in February 2022. The new set of sanctions is aimed at limiting the ability of Russia’s financial sector including entities, internationally connected Russian banks and individuals to fund the government in its war against Ukraine.

The US Treasury Department’s Office of Foreign Assets Control (OFAC) said that the sanctions designated Gazprombank, which was untouched in the last two and half years fearing it would unstabilise the global oil markets, along with several banks, over 40 Russian securities registrars and 15 Russian finance officials.

The Treasury department has alleged that Gazprombank has been a conduit for Russia to purchase military equipment for its war against Ukraine and the Russian government also uses the bank to pay its soldiers including for combat bonuses, and to compensate the families of Russian soldiers killed in the war against Ukraine.

The sanctions mean that all property and interests of the institutions, entities or individuals targeted by the sanctions are blocked.

Tightening Screws

“The sanctions will further diminish and degrade Russia’s war machine. This sweeping action will make it harder for the Kremlin to evade U.S. sanctions and fund and equip its military. We will continue to take decisive steps against any financial channels Russia uses to support its illegal and unprovoked war in Ukraine,” US Treasury Secretary Janet L Yellen said.

The US National Security Adviser Jake Sullivan also said that the new sanctions were part of a pledge made by President Joe Biden in September to provide additional assistance and actions to help Ukraine as it continues to resist Russia’s aggression.

OFAC said that it was also issuing an alert describing sanctions risks related to Russia’s System for Transfer of Financial Messages (SPFS), which the Kremlin created and uses to evade sanctions.

Luxembourg-based bank GPB International SA, Hong Kong-based GPB Financial Services Hong Kong Limited, Cyprus-based GPB Financial Services Limited and GPB-DI Holdings Limited, Switzerland-based Gazprombank (Switzerland) Ltd, and South Africa-based GPB Africa and Middle East Pty Ltd are wholly owned subsidiaries of Gazprombank.

All these entities owned 50% or more, directly or indirectly, by Gazprombank or the six designated Gazprombank subsidiaries, are subject to blocking, even if not identified by OFAC, the Treasury department said.

Concurrently with this action, OFAC is issuing two new general licenses authorising the US persons to wind down transactions involving Gazprombank, among other financial institutions, and to take the necessary steps to divest from debt or equity issued by Gazprombank.

Russian Securities Registrars

The US government said that OFAC was aware that Russia has tried to evade or avoid sanctions on the National Settlement Depository by requiring, via Presidential Decree 840, the transfer of certain securities to local Russian securities registrars and more than 40 such registrars have also been sanctioned.