U.S. turns up heat on Russian banking system with new sanctions

The Treasury’s “significant and unprecedented” measures built off earlier sanctions announced by President Joe Biden on Monday. While the first wave of sanctions was considered to have little implication for U.S. companies or their global supply chains, Thursday’s actions have changed the situation by affecting 80 percent of all banking assets in Russia.

The United States has sanctioned Russia’s two largest banks—Sberbank and VTB Bank—in addition to almost 90 financial institution subsidiaries around the world. Further, new prohibitions have been imposed related to new debt and equity of major Russian state-owned enterprises and large privately owned financial institutions.

“These actions are specifically designed to impose immediate costs and disrupt and degrade future economic activity, isolate Russia from international finance and commerce, and degrade the Kremlin’s future ability to project power,” the Treasury stated.

Regarding Sberbank, Russia’s largest financial institution, the Treasury’s Office of Foreign Assets Control (OFAC) is “requiring all U.S. financial institutions to close any Sberbank correspondent or payable-through accounts and to reject any future transactions involving Sberbank or its foreign financial institution subsidiaries” within 30 days. VTB Bank is subject to full blocking sanctions, resulting in the immediate freeze of all assets held in U.S. financial institutions.

Also facing full blocking sanctions are three additional major Russian financial institutions: Otkritie, Novikom, and Sovcom.

Companies affected by the Treasury’s debt and equity prohibitions include the world’s largest natural gas company (Gazprom), Russia’s largest telecommunications company (Rostelecom), Russia’s largest maritime and freight shipping company (Sovcomflot), and more. The action is designed to heavily restrict the companies from raising money through the U.S. market.

Further measures announced include Russia-wide restrictions on semiconductors, telecommunication, encryption security, lasers, sensors, navigation, avionics, and maritime technologies. A handful of Russian elites and individuals close to President Vladimir Putin were also sanctioned, as were 24 Belarusian individuals and entities as a result of the country’s support for the Ukraine invasion.

The European Union, Australia, Japan, Canada, New Zealand, and the United Kingdom all have taken or are expected to take similar measures against Russia as its actions intensify.

The Treasury Department on Friday sanctioned Putin directly, along with Russian Foreign Minister Sergey Lavrov, after the European Union and United Kingdom announced similar sanctions.

Of note, Russia has not yet been cut off from the SWIFT payment network, which would severely hamper financial institutions’ ability to transfer money in or out of the country.

Editor’s note: This story was updated Feb. 25 to reflect sanctions announced against Russian President Vladimir Putin and Foreign Minister Sergey Lavrov.