Russian Banks Shrug Off U.S. Sanctions, For Now
Published: July 18, 2014 (Issue # 1820)
The two major Russian state-controlled banks hit with U.S. sanctions will be able to shrug off the measures, which fall far short of sector-wide sanctions, analysts said Thursday.
However, the new wave of sanctions will likely raise the cost of borrowing and slam the door on Russian banks' access to international loans, just as the market was beginning to revive.
The measures taken by the U.S. on Wednesday bar two of Russia's largest banks, Gazprombank and Vneshekonombank, or VEB, from access to medium- and long-term dollar financing, which the U.S. says will "impose additional significant costs on the Russian government for its continued activities in Ukraine."
On the face of it, the new measures amount to massive escalation. Previous rounds of sanctions hit relative banking minnows, while VEB and Gazprombank are two of the country's largest lenders. Gazprombank, Russia's No. 3 bank, has assets worth some 4 trillion rubles ($116 billon). VEB, though not strictly speaking a bank but a government-controlled corporation, is the state's preferred tool for funding infrastructure projects and propping up industry and small business. It aims to grow its loan portfolio to 850 billion ($25 billion) by the end of this year.
Yanking the carpet from under these lenders would send Russia's economy spinning, but the new sanctions do no such thing, analysts said.
Earlier sanctions against SMP Bank and Bank Rossiya, whose owners were accused by the U.S. of being members of President Vladimir Putin's inner circle, effectively ejected them from the financial world beyond Russia's borders. Western companies were barred from dealing with them, and U.S.-based payment systems Visa and MasterCard stopped servicing them.
Wednesday's sanctions, however, target only financing for periods of more than 90 days, and even that restriction will be easy to outmaneuver with the help of canny financial advisers, according to Maxim Osadchy, head of analysis at Moscow-based Corporate Finance Bank.
Visa and MasterCard, meanwhile, announced Thursday that they would continue to service the two banks.
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