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US sanctions Russia — again, sending a strong signal to Europe and Putin

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

On 1st September 2016 the US Treasury announced a further expansion of US sanctions against Russia.

The new sanctions are essentially symbolic.  They fall into four distinct categories:

  1. against CJSC ABR Management (“ABR Management”) for undertaking certain management work on behalf of the already sanctioned Bank Rossiya – a medium sized Russian bank based in St. Petersburg which the US and various other people have convinced themselves – almost certainly wrongly – that Putin either owns or has a stake in.
  2. against certain individuals holding various official positions either in Crimea or in the Donetsk People’s Republic;
  3. against certain companies and Russian state institutions involved in building the bridge between Crimea and Kerch; and
  4. against certain companies which are subsidiaries of Gazprom and are involved in its work.

The bridge being built between Crimea and Kerch is connected to Arkady Rotenberg, who is already subject to US sanctions.  

Any companies connected or controlled by him would already be effected by sanctions.  

Gazprom is itself subject to sanctions as by extension are its subsidiaries, which are involved in its operations. 

Any individuals holding public office whether in Crimea or with the Donetsk People’s Republic would naturally assume they would be placed on a US sanctions list, as would any company, person or agency carrying out management or financial work for Bank Rossiya, which is the subject of a particularly venomous campaign of sanctions because of the mistaken belief that it is Putin’s bank.  

On the subject of ABR Management, the US Treasury statement suggests the US thinks it is Putin’s proxy in Bank Rossiya board and shareholders’ meetings.  Specifically the US Treasury says that ABR Management is

“…..the trustee under a trust agreement with certain Bank Rossiya shareholders….”

The words “certain Bank Rossiya shareholders” may refer to Putin, who the US Treasury believes is the true owner of Bank Rossiya.  The fact that the US Treasury says that ABR Management manages a majority of the shares and is able to appoint individuals to senior office in the bank strongly suggests that.  In reality ABR Management – if the US Treasury is describing its work correctly – is almost certainly performing this role for Bank Rossiya’s actual majority shareholders, who are known to be Yury Kovalchuk (the Bank’s CEO) and two St. Petersburg businessmen, Nikolay Shamalov and Dmitry Gorelov.

Having said this, overall the key point is that since the new sanctions merely sanction companies and individuals who are in effect if not in fact sanctioned already, they actually add nothing to the sanctions already in place.

Why then did the US impose them?

Given the bad personal relations between Obama and Putin, one possibility has to be that they were intended “to put Putin in his place” on the eve of their meeting in Hangzhou.  The sanctions against ABR Management – if the US really does think it is Putin’s proxy – certainly look that way.  

If that sounds petulant, I would say that petulance has been a distinguishing feature of Obama’s conduct of diplomacy ever since he became President.

Having said this, the sanctions against the Gazprom subsidiaries and the companies involved in the Kerch-Crimea bridge project look more likely to have been intended as a signal of US support for Ukraine in the run up to the parliamentary elections in Russia – which will of course include Crimea – and as a signal to the Europeans not to ease off the EU’s sanctions when they come up for renewal in December.

As I have discussed previously, there is a head of steam building up in Europe against the EU’s sanctions.  The new US sanctions seem to be intended as a warning that the US has no intention of softening its own sanctions, and that if EU sanctions are lifted or relaxed any European banks or companies that deal with US sanctioned entities in Russia will find themselves fined and prosecuted by the US authorities.


The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

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