We’re continuing our tradition of explaining in plain language what exactly these sanctions imposed on Russia are. There’s a lot of confusion in the media, so Nikita Kulachenkov from ACF’s investigations department breaks it all down clearly. And let me immediately remind you that ACF has put together a handy summary table where you can find up-to-date lists and types of sanctions imposed by the US and the EU after the annexation of Crimea.
The last changes to US sanctions came in the summer of 2015, and now today the Office of Foreign Assets Control (OFAC) has suddenly published a huge new list of companies and legal entities. No new types of sanctions are being introduced, but the existing sanctions now apply to a larger number of targets.
Let me say right away that Yandex.Money, which has also been sanctioned, is not facing anything especially serious, and it will continue processing payments.
Companies placed on this list effectively lose the ability to do business with foreign counterparties, and banks will no longer be able to process international payments for them.
Two dozen companies have fallen under these sanctions, among them:
Among the individuals added to the lists are mostly various figures associated with the DPR/LPR (the self-proclaimed Donetsk and Luhansk “people’s republics”), but one notable name is Swedish citizen Sven Olofsson, who previously served on the board of oil trader Gunvor. Olofsson left the board immediately after sanctions were imposed on Timchenko, but apparently continued working with him and has now paid the price for it. To recap, Mr. Olofsson will now be unable to hold accounts at any bank in the US or EU, and dealing with other banks will also become very difficult for him. He is also now barred from entering the United States.
This mix of companies and individuals shows that the US is closely monitoring what is happening in Crimea and how previously imposed sanctions are being observed.
By the way, a telling example of how sanctions against individuals work could be seen recently. This concerns the termination of a deal for Kirsan Ilyumzhinov to purchase TogliattiAzot. The deal had been in preparation for several months, but two days after Ilyumzhinov was added to the sanctions lists over Syria, it was canceled at the seller’s initiative. TogliattiAzot is a Russian company, and the people selling its shares are Russian citizens. Because of the sanctions, a deal entirely within Russia, involving no foreigners at all, fell through.
Legal entities on this sanctions list will not be able to obtain loans from Western banks, issue bonds, or sell their shares to foreign investors. As many as 87 companies have been added to the list, and they can be grouped according to the following characteristics:
The ban on raising foreign financing will require additional funds from parent organizations. If necessary, VTB will have to finance its subsidiary bank in Georgia, Azerbaijan, or Austria using its own expensive funds, since neither the subsidiary nor the parent company will now be able to secure cheap external borrowing. Needless to say, Sberbank’s financial condition—and especially VTB’s—has not been particularly strong over the past two years anyway.
The addition of new companies to the sanctions lists shows that the US is taking a consistent position on this issue, one that is not influenced, for example, by Russia’s actions in Syria. The sanctions are tied to Crimea and Ukraine, and the situation in that area has not changed in any way, so the US is updating the lists to ensure enforcement of the restrictions introduced in the spring and summer of 2014.
P.S. We’d also like to remind you about our explainer on all types of sanctions and their impact on Russia.
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