News / Europe

Sources: Russian Bank Subsidiaries in EU to Escape Sanctions

FILE - People stand in a line as they wait to enter a branch of Sberbank of Russia bank in the Crimean city of Simferopol April 7, 2014.
FILE - People stand in a line as they wait to enter a branch of Sberbank of Russia bank in the Crimean city of Simferopol April 7, 2014.

New US, EU sanctions on Russia

  • Until July 29, 2014, sanctions solely targeted individuals and organizations accused of directly threatening Ukraine and its interests
  • New sanctions prohibit Russian state-owned banks from raising funds in Western capital markets
  • About 30% of Russia’s banking sector will be impacted
  • Energy-related technology used for Russia’s oil exploration and development is blocked
  • Affected areas include technology relating to deep-water or Arctic drilling and exploration projects
  • EU officials say the ban extends to about 10% of overall energy exports to Russia
  • Restrictions on Russian arms exports
  • A ban on trade of dual-use sensitive defense technologies with Russia

Sources: Reuters and multiple news reports

Russian bank subsidiaries based in the European Union will be exempt from EU economic sanctions designed to choke off finance for big state-owned Russian lenders, sources familiar with the discussions told Reuters on Wednesday.

These sources said the exemption, which EU officials said they would monitor closely to avoid abuse, meant Sberbank and VTB subsidiaries could operate normally within EU member states.

The step will come as a relief to Austria, where the two big state-controlled Russian lenders have the headquarters of their European operations, the sources said.

Hungary and Slovakia had also said the latest sanctions - aimed at punishing Moscow for fomenting Ukraine's political crisis - should not apply to Russian banks operating in the EU to prevent disruptions on their retail operations, two sources close to the discussions told Reuters.

Details of the EU sanctions - which include banning state-controlled Russian banks from raising long-term financing by selling stock or bonds on EU markets - are due to be published on Thursday and enter into force on Friday.

The European Commission has not yet published a list of the Russian banks that will be affected but has said it will apply only to Russian banks that are more that 50 percent owned by the state or other public authorities.

Sberbank is majority-owned by the Russian central bank, and VTB is majority-owned by the government.

“We limited the geographical scope to Russia. We did not want to include EU subsidiaries registered and established in the EU,” one EU source said, seeing as the risk as “manageable”  that these local lenders could transfer cash to their parents.

“These subsidiaries never issued corporate bonds or equities in the past three or four years, so it will be extremely visible if they start doing it now,” the official said.

Bank run risk

Sberbank Europe operates across central and eastern Europe after buying Austrian Volksbanken's VBI eastern European arm in 2012, and VTB Bank (Austria) has operations in Germany and France as well.

“When our bank supervisors looked into this they said: 'Listen, guys, what you do not want is to create a bank run,”' one government official said on condition he not be named.

He dismissed the suggestion that the move was an attempt to head off retaliation by Moscow against Austrian banks active in Russia such as Raiffeisen Bank International.

An EU sanctions committee will review how the system is functioning and ensure that EU-based subsidiaries are not funneling funds they raise back to their parents. “We are not blind and deaf and stupid,” the government official said.

Loans, including syndicated loans, are not covered by the sanctions but European banks will probably be reluctant to arrange lending to Russian borrowers.

Sberbank Europe and VTB Bank (Austria) declined comment.

VTB, which will also be hit by U.S. sanctions that thwart its ability to access dollar financing, said earlier it was ready to borrow in other currencies and markets.   

You May Like

US, China Have Dueling Definitions of Cybersecurity

Analysts say attribution or or proving that a particular individual or government is responsible for a hack, is a daunting task More

Snowden: I'd Go to Prison to Return to US

Former NSA contractor says he has not received a formal plea-deal offer from US officials, who consider him to be a traitor More

Goodbye Pocahontas: Photos Reveal Today's Real Native Americans

Weary of stereotypes, photographer Matika Wilbur is determined to reshape the public's perception of her people More

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Making a Minti
October 07, 2015 4:17 AM
While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Making a Mint

While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Activists Decry Lagos Slum Demolition

Acting on a court order, authorities in Nigeria demolished a slum last month in the commercial capital, Lagos. But human rights activists say the order was illegal, and the community was razed to make way for a government housing project. Chris Stein has more from Lagos.

Video Self-Driving Cars Getting Closer

We are at the dawn of the robotic car age and should start getting used to seeing self-driving cars, at least on highways. Car and truck manufacturers are now running a tight race to see who will be the first to hit the street, while some taxicab companies are already planning to upgrade their fleets. VOA’s George Putic has more.

Video TPP Agreed, But Faces Stiff Opposition

President Barack Obama promoted the Trans-Pacific Partnership on Tuesday, one day after 12 Pacific Rim nations reached the free trade deal in Atlanta. The controversial pact that would involve about 40 percent of global trade still needs approval by lawmakers in respective countries. Zlatica Hoke reports Obama is facing strong opposition to the deal, including from members of his own party.

Video Clinton Seeks to Boost Image Before Upcoming Debate

The five announced Democratic party presidential contenders meet in their first debate next Tuesday in Las Vegas, Nevada. Former secretary of state Hillary Clinton continues to lead the Democratic field, but she is getting a stronger-than-expected challenge from Vermont Senator Bernie Sanders. VOA National correspondent Jim Malone has more from Washington.

Video Music Brings Generations Together

When musicians over the age of 50 headline a rock concert, you expect to see baby boomer fans in the audience. Boomer rock stars have boomer fans. Millennial rock stars have millennial fans. But this isn’t always the case. Take the Lockn’ Music festival which took place in mid-September in rural Arrington, Virginia. Here, Jacquelyn de Phillips discovered two generations of people who are considered quite different in the outside world, spending 4 days together in music-loving harmony.

Video Ukranian Artist Portrays Putin in an Unusual Way

As Russian President Vladimir Putin was addressing the United Nations in New York last month, he was also being featured in an art exhibition in Washington. It’s not a flattering exhibit. It’s done by a Ukrainian artist in a unique medium. And its creator says it’s not only a work of art - it’s a political statement. VOA’s Tetiana Kharchenko has more.

Video South Carolina Reels Under Worst-ever Flooding

South Carolina is reeling from the worst flooding in recorded history that forced residents from their homes and left thousands without drinking water and electricity. Parts of the state, including the capital, Columbia, received about 60 centimeters of rain in just a couple of days. Authorities warn that the end of rain does not mean the end of danger, as it will take days for the water to recede. Zlatica Hoke reports.

Video Russia’s Syria Involvement Raising Concerns in Europe

European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

VOA Blogs