(Adds JPMorgan comment, background on size of bank)
By Thomas Grove and Megan Davies
MOSCOW, April 1 Russia accused U.S. bank
JPMorgan on Tuesday of "illegally" blocking a payment
from one of its embassies to an insurance agency "under the
pretext of anti-Russian sanctions."
In a statement on its website, the Russian Foreign Ministry
suggested the action, which it called "unacceptable, illegal and
absurd," would have consequences for the U.S. embassy and
consulate in Russia.
One of the highest profile confrontations yet over U.S.
sanctions, the move may increase tensions between Washington and
Moscow and add to U.S. companies' nervousness over doing
business in Russia.
"Washington should understand any hostile action against a
Russian diplomatic mission not only constitutes a flagrant
violation of international law but is rife with consequences
that will inevitably effect the work of the embassy and general
consulate of the United States in Russia," Russia's statement
The bank said later in its own statement that it is subject
to government regulations and that it "will continue to seek
guidance from the U.S. government on implementing their recent
The payment came from Russia's embassy in Kazakhstan to
Russian insurance agency Sogaz, which is partly owned by Abros,
according to the Sogaz website. Abros is a subsidiary of Bank
Rossiya, according to Russian media reports, which is facing
Bank Rossiya was blacklisted by the White House last month
as part of a widening effort to punish Russian President
Vladimir Putin's inner circle over Moscow's role in the Ukraine
Industry consultants in Moscow have said financial
institutions are unclear about how to apply the new rules in
some situations, such as when dealing with subsidiaries of
companies which have either been sanctioned or which have
shareholders that have been punished.
"There is a lot of confusion ... as to what might be the
full scope of the sanctions and what we are hearing is while the
sanctions are specific, a lot of U.S. companies are adopting a
much more risk-averse or cautious approach," said Chris Weafer,
partner at Macro Advisory.
"There is almost self-sanctioning going on."
Visa and Mastercard briefly cut off services
for clients at Russia's SMP bank, whose main shareholders were
affected by U.S. sanctions, before resuming them shortly
"The general rule is that if a company is controlled ... by
an individual on the list, they can't do business with that
company," one financial consultant said last week, speaking on
condition of anonymity.
"But it's quite a slippery slope regarding the whole holding
structure," the source said.
Russia's accusation could damage relations the bank has with
the country. JPMorgan generated $55.6 million in investment
banking fees in Russia last year, with a 7 percent market share.
Worldwide, JPMorgan recorded $6.4 billion in investment banking
fees last year, according to the company's annual report.
JPMorgan is the biggest U.S. bank by assets and for its size
it does relatively little lending in Russia. At year-end, its
loans and trading positions at risk to Russia totalled $5.4
billion compared with the company's total assets of $2.4
JPMorgan is one of a number of Western banks operating in
Russia. Others which have a presence here include Goldman Sachs
, Bank of America, Citigroup and Morgan
(Additional reporting by David Henry in New York; Editing by
Andrew Roche and Chizu Nomiyama)