News / Economy

Sanctions Problematic for Foreign Executives, Their Russian Firms

FILE- Russian President Vladimir Putin (L) and CEO of state-controlled Russian oil company Rosneft Igor Sechin speak during a signing ceremony of cooperation agreements with Venezuela, in the Kremlin in Moscow, July 2, 2013.
FILE- Russian President Vladimir Putin (L) and CEO of state-controlled Russian oil company Rosneft Igor Sechin speak during a signing ceremony of cooperation agreements with Venezuela, in the Kremlin in Moscow, July 2, 2013.
Reuters

Western sanctions over the Ukraine crisis could force some executives at Russian firms with foreign passports to give up certain duties, complicating life at the top of some of the country's largest companies.

U.S. and European Union sanctions bar some major Russian firms from raising new Western financing of more than 90 days. They also ban U.S. or EU nationals and companies from providing services related to the organization of long-term funding for the companies, regardless of where it comes from.

Out of the companies on the sanctions lists, Reuters has identified some with senior managers holding a Western passport, including energy firm Novatek, top lender Sberbank, number two bank VTB and oil major Rosneft.

Executives with foreign passports at Novatek and VTB have already handed over responsibility for organizing new debt or equity issuance to colleagues without EU or U.S. passports.

Banking insiders say beyond the inconvenience of reshuffling roles, the problem has not yet had a major impact. But it adds to a list of Western sanctions that have produced an unintended “boomerang” effect: causing problems for Western firms or individuals, as much as for the Russian targets.

Headhunting firms said there has been no exodus of foreign executives from Russian firms as a result of the sanctions, but the problems thrown up could accelerate an existing trend of Russians replacing foreigners in senior posts.

The financing restrictions create “certain problems with the ability of a foreign national working with or in Russia who has to do a certain job such as getting finance flows in order,” said Felix Kugel, Vice President and Managing Director at ManpowerGroup in Russia and Commonwealth of Independent States.

Investment banks are also are potentially affected. A banking source, who spoke on condition of anonymity, said Russian bankers had to step in to handle the financing of sanctioned firms, in place of colleagues with foreign passports.

Changing roles

Novatek, Russia's biggest non-state-owned gas producer, was the first firm to publicly acknowledge it had been forced to re-jig senior roles because of the Western sanctions.

Mark Gyetvay, a U.S. citizen and Novatek's chief financial officer for more than 10 years, has acknowledged that he no longer can help his firm raise new long-term financing.

“None of my other primary roles and responsibilities as the CFO in Novatek have been impacted by the sanctions, except for participating in new debt issuance with maturities of 90 days or longer,” Gyetvay told a conference call last month.

Novatek holds a 60 percent stake in the ambitious Yamal liquefied natural gas project, which requires investment of $27 billion. Up to 70 percent is initially expected to come from project finance through banks, including overseas institutions.

Still, Leonid Mikhelson, chief executive and a Novatek shareholder, has said the firm and the other partners in Yamal -- France's Total and China's CNPC -- are capable of increasing shareholder funding should there be issues with banks.

Two banking sources told Reuters that Herbert Moos, CFO at VTB who joined the group from Lehman Brothers in 2008, has a European passport. Moos said on a conference call last week that VTB's Senior Vice President Dmitry Pyanov will now coordinate fundraising for the state-controlled bank.

Moos declined to comment on whether the decision was linked to sanctions. In a written response to a Reuters request for comment, VTB said Pyanov was appointed to coordinate fundraising in February, before any sanctions were imposed, while Moos is still overseeing the financial department Pyanov heads.

Last week, VTB posted an 82 percent slide in first-half net profit, saying Russia's economic slowdown and tensions over the Ukraine crisis had hit its performance.

Longer-term risks

The impact of the curbs on who can be involved in raising long-term finance has been limited in part because sanctions-hit firms are barred from raising Western finance anyway, regardless of the nationality of the executives involved.

One person who holds a Western passport and works at a firm on the sanctions list said he had not heard of any fallout inside his company “just because there are no deals.”

But this could change over the medium or longer term if sanctions are extended, or firms that will not get alternative state support run out of cash -- and are forced to look for other sources of finance.

Sberbank CIB, Sberbank's investment banking arm, declined to comment on whether any of its staff had adjusted their roles.

Sberbank itself said deals were always being coordinated by “a large, diversified and balanced” team, which allowed it to take all risks into account without harming business.

Top oil producer Rosneft said Western sanctions had not led to any restrictions on its top executives responsibilities, irrespective of their nationality.

Other big finance firms named in the Western sanctions lists include Gazprombank and Russian Agricultural Bank, also known as Rosselkhozbank.

A statement from Gazprombank read, “There are no cases in Gazprombank when employees have to step away from their responsibilities or roles due to the sanctions.”

Rosselkhozbank said there were no EU or U.S. passport holders among its employees responsible for capital raising.

Oleg Kozlov, vice president at management consultancy firm AMT Consult, said he had not seen foreigners leaving Russia in massive numbers as compensation packages remained attractive.

“In the medium term, the situation could possibly change given the overall worsening in economy,” he said.

You May Like

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

Russia’s Prosecutor General to Review Legality of Baltics Independence

Move, announced Tuesday, has alarmed Baltic States and strained even further their increasingly tense ties with Moscow More

US Urged to Keep Up Pressure on Cuba Rights

Communist government continues to hold dozens of political prisoners, tightly restricts freedom of expression, uses threats, intimidation to discourage critics, according to activist groups More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Hate Groups Spread Influence Via Interneti
X
Mike O'Sullivan
June 30, 2015 8:20 PM
Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Syrians Flee IS Advance in Hasaka

The Syrian government said Monday it has taken back one of several districts in Hasaka overrun by Islamic State militants. But continued fighting elsewhere in the northern city has forced thousands of civilians from their homes. In this report narrated by Bill Rodgers, VOA Kurdish Service reporter Zana Omer describes the scene in Amouda, where some of the displaced are taking refuge.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video S. Korea Christians Protest Gay Rights Festival

The U.S. Supreme Court decision mandating marriage equality nationwide has energized gay rights supporters around the world. Gay rights remain a highly contentious issue in a key U.S. ally, South Korea, where police did a deft job Sunday of preventing potential clashes between Christian protesters and gay activists. Kurt Achin reports from Seoul.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.
Video

Video In Syrian Crisis, Social Media Offer Small Comforts

Za’atari, a makeshift city in Jordan, may be the only Syrian refugee camp to tweet its activities, in an effort to keep donors motivated as the war in Syria intensifies and the humanitarian crisis deepens. Inside the camp, families say mobile phone applications help hold together families that are physically torn apart. VOA’s Heather Murdock reports.

VOA Blogs

World Currencies

EUR
USD
0.8982
JPY
USD
122.88
GBP
USD
0.6363
CAD
USD
1.2374
INR
USD
63.836

Rates may not be current.