| PARIS/MOSCOW, March 21
PARIS/MOSCOW, March 21 U.S. and European
sanctions against Russia are already having a ripple effect
beyond their immediate targets, with Visa and MasterCard
halting payment transaction services for clients of a
bank not even on the blacklist.
SMP bank's co-owners are two of the 20 Russians targeted by
U.S. President Barack Obama as he tries to punish Russian
President Vladimir Putin for annexing Crimea.
The lender described the move by Visa and MasterCard as
unlawful. However, financial services firms are
wary of doing business with any person or group that can be
linked back to Obama's blacklist.
Banks have paid dearly in the past for violating U.S.
sanctions on countries such as Iran, and the threat of broader
measures against the Russian economy should Putin threaten
southern and eastern Ukraine reinforces their caution.
The U.S. sanctions forced Russian billionaire Gennady
Timchenko to sell his nearly 50 percent stake in Gunvor, the
world's fourth-largest oil trader, this week but their direct
effect has generally been relatively minor so far.
What bankers and business people fear is an escalation of
measures that would choke off international payments and trade,
halt investments and stymie deals. Germany's main trade body
warned on Friday that full-blown economic sanctions would be a
In a worst-case scenario, Washington would stop banks doing
business with Russian counterparts and corporates, similar to
the sort of sanctions that were imposed on Iran.
Germany's "wise men" council of economic advisers said this
week that the Ukraine crisis was the biggest threat to growth
globally, and especially in Germany, because of Russia's
importance of an energy exporter.
"What has been announced so far is really nothing. It's
purely cosmetic," said a French banker based in Moscow.
"The biggest risk is tougher sanctions and really the
potential impossibility of transfers in U.S. dollars. That will
hit trade finance, which depends on correspondent accounts in
dollars," said the banker, who declined to be named because of
official sensitivity around the restrictions.
"Being able to make payments in dollars is crucial for the
Russian economy, which is dependent on energy exports. It would
really hurt us domestically."
Bank exposure to Russia link.reuters.com/xej67v
Russia's main trade partners link.reuters.com/jup77v
Russia's EU trade ties link.reuters.com/rup77v
State-owned Russian banks and companies are expected to
repatriate funds from overseas after Putin told them this week
to bring their assets home. But foreign bankers in Russia said
things would have to deteriorate further before they would
reconsider their investments there.
"It would have to be a lot worse than this. We are waiting
for the response from the Russian side. It's very difficult to
predict," said another Western banker in Moscow. "I haven't
heard of any Western companies pulling out of Russia. If a
company is substantially invested here it will be difficult for
them to consider getting out."
WAIT AND SEE
Even before the Crimean crisis blew up last month,
international banks such as HSBC, Credit Suisse
and Barclays had pulled out of dozens of
markets because the risk of falling foul of financial crime
rules and sanctions outweighed the returns.
The cost to banks of cleaning up an array of misdeeds that
have come to light since the global financial crisis, including
sanctions busting, has soared to over $100 billion.
With that figure expected to climb, Western banks have so
far steered clear of attempts by Iran to get them involved in
financing humanitarian transactions, despite a diplomatic thaw.
With the U.S. and European sanctions so far focused on
wealthy individuals close to Putin, private banks which cater to
powerful Russians are under the spotlight.
Switzerland, the centre of international private banking and
a bolt-hole for wealthy Russians, has yet to impose any
sanctions but its banks, such as UBS and Credit
Suisse, still have to be aware of sanctions when they deal with
Beyond banking, big companies such as AstraZeneca
have said they are monitoring the situation in Russia, while
doubts are growing over whether smaller firms with less
financial flexibility should push ahead with investments in
Russia such as building factories.
"They are in a wait-and-see mode. But again the timing could
be waiting three to six months rather than scrapping the whole
thing," said a second French banker working in Moscow.
Vasili Brokvo, the head of communications for Russia's state
defence conglomerate Rostec, made the corporate case for peace.
"We hope and our international partners also hope that
political differences over certain issues won't annul or destroy
everything we've built and all previous agreements with foreign
partners will be successfully implemented," he said on a
business trip to Chile this week.
(Additional reporting by Katharina Bart in Zurich, Ben
Hirschler in London and Alexandra Ulmer in Santiago. Writing by
Carmel Crimmins; editing by David Stamp)