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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video VOA EXCLUSIVE: US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

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

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez 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 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 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 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.

VOA Blogs

World Currencies

EUR
USD
0.9009
JPY
USD
123.09
GBP
USD
0.6387
CAD
USD
1.2524
INR
USD
63.605

Rates may not be current.