Washington announced a new round of anti-Russian sanctions on November 21. The US Office of Financial Assets Control (OFAC) blacklist includes 118 Russian organizations and individuals. This is the fourth package of U.S. sanctions against Russia this year, with the primary focus on entities in Russia’s financial sector, including banks, registrars, and depositories. The number of individuals and entities targeted is the smallest among the four packages. For comparison, the February package included 500 entities, the July package was approximately 300, and the August package was approximately 400.
Nevertheless, experts think that this fourth package, despite its limited extent of approximately 100 entities, could be the most significant, as it impacts the international payment systems and trade settlements for Russian exports and imports.
Main Points of the Latest US Sanctions
The blacklist comprises 16 individuals, 11 of whom are officials of the Central Bank of Russia. These officials include First Deputy Governors Vladimir Chistyukhin and Dmitry Tulin, Deputy Governor Olga Polyakova, and numerous department administrators. Sanctions against the chief of the Central Bank and its first deputy came into effect in September 2022, making this the least severe component of the package.
The package also includes a list of approximately 15 registrars and depositories, including the Regional Independent Registrar Agency, Eurasian Registrar, and Depository Company “Region” (AO DK REGION).
Approximately 50 banks, including significant players such as Gazprombank, Dom.RF, BCS Bank, and Trust Bank of Non-Core Assets comprise the largest group. Targeted institutions include Agroros, BBR Bank, National Reserve Bank, and PrimSocBank. This package expands the SDN (Specially Designated Nationals) list to include legal entities subject to the most stringent sanctions regime. This regime includes exclusion from the global dollar system and disruption of supply chains involving US entities.
Focus on Gazprombank
Gazprombank, the third-largest bank in Russia by assets and a designated “authorized bank” for processing payments for Russian natural gas exports, is the main goal of this package.
A presidential decree from March 2022 mandated international purchasers of Russian gas to open accounts at Gazprombank in both rubles and foreign currencies. Gazprombank converted foreign currency payments into rubles to resolve gas transactions. Gazprombank relocated currency exchanges to over-the-counter markets in response to sanctions on the Moscow Exchange.
Reports indicate that Gazprombank has amassed foreign currency to purchase machinery and equipment for Russia’s defense industry. The US Treasury aims to hinder Russian military and economic capabilities by disrupting the bank’s operations.
Effects on Russian Gas Exports
European Union nations paid €839.9 million for Russian pipeline gas in September 2024, a 30% increase from August and a 36% increase from September 2023. The international subsidiaries of Gazprombank in Luxembourg, Hong Kong, Switzerland, South Africa, and Cyprus are also being targeted. The US entities must discontinue Gazprombank transactions by December 20, 2024, except for transactions related to the Sakhalin-2 project, which can continue until June 28, 2025.
UnionPay and its Effect on Consumers
The sanctions impacted the lives of ordinary Russian citizens, as Gazprombank was one of the few financial institutions that offered UnionPay cards for international transactions. The bank removed the option to issue UnionPay cards from its website following the sanctions.
European and Turkish Reactions
The sanctions caused apprehension in Europe, particularly as the demand for petroleum normally rises during the winter. Hungary’s foreign minister, Peter Szijjarto, criticized the sanctions as a threat to the sovereignty of Central Europe. Reports suggest that the European Union is negotiating with Washington to reduce the restrictions on Gazprombank, potentially facilitating legitimate remittances through its Luxembourg subsidiary.
According to Hungarian Foreign Minister Peter Szijjarto, a legal solution has been identified for the continuation of the transit of Russian gas through Bulgaria to Hungary in the context of US sanctions against Gazprombank. The legal details are currently being resolved.
Alparslan Bayraktar, the Minister of Energy and Natural Resources, stated that Turkey will also be impacted by this decision and is seeking to be exempted from sanctions. Turkey’s priority at present is to be removed from this sanctions list. Turkey addressed this matter during the discussions that transpired during the visit of US Secretary of State Blinken to Ankara. It was noted that the requisite applications had been submitted. According to the Hurriyet newspaper, the Americans also stated that they are cognizant of these applications, that they are aware of the issue, and that they are studying them.
Russian Reaction
On December 5, a presidential decree in Russia amended gas payment regulations, allowing transactions through mutual offsets or non-sanctioned banks. Experts perceive this as a first step toward alternative international payment systems, such as international clearing or barter, which could significantly influence Russia’s response to sanctions.
More Sanctions Likely
US Treasury Secretary Janet Yellen did not rule out the possibility of imposing sanctions on Chinese banks that are reportedly aiding Russia’s defense industry in the conflict with Ukraine, provided that there is “evidence.” Simultaneously, she reiterated that the United States will keep up in its efforts to tighten sanctions on Russian oil exports and may impose sanctions on ships that are purportedly engaged in transportation. Additionally, the previously implemented price ceiling on Russian fuel will be reduced. The term of the US Treasury Secretary concludes on January 20, 2025.