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

    Video Obama Remembers Fallen Troops for Memorial Day

    President urges Americans this holiday weekend to 'take a moment and offer a silent word of prayer or public word of thanks' to country's veterans

    Upsurge of Migratory Traffic Across Sahara From West to North Africa

    A report by the International Organization for Migration finds more than 60,000 migrants have transited through the Agadez region of Niger between February and April

    UN Blocks Access to Journalist Advocacy Group

    United Nations has rejected bid from nonprofit journalist advocacy group that wanted 'consultative status,' ranking that would have given them greater access to UN meetings

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Chinese-Americans Heart Trump, Bucking National Trendi
    X
    May 27, 2016 5:57 AM
    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.
    Video

    Video Meet Your New Co-Worker: The Robot

    Increasing numbers of robots are joining the workforce, as companies scale back and more processes become automated. The latest robots are flexible and collaborative, built to work alongside humans as opposed to replacing them. VOA’s Tina Trinh looks at the next generation of automated employees helping out their human colleagues.
    Video

    Video Wheelchair Technology in Tune With Times

    Technologies for the disabled, including wheelchair technology, are advancing just as quickly as everything else in the digital age. Two new advances in wheelchairs offer improved control and a more comfortable fit. VOA's George Putic reports.
    Video

    Video Baby Boxes Offer Safe Haven for Unwanted Children

    No one knows exactly how many babies are abandoned worldwide each year. The statistic is a difficult one to determine because it is illegal in most places. Therefore unwanted babies are often hidden and left to die. But as Erika Celeste reports from Woodburn, Indiana, a new program hopes to make surrendering infants safer for everyone.
    Video

    Video California Celebration Showcases Local Wines, Balloons

    Communities in the U.S. often hold festivals to show what makes them special. In California, for example, farmers near Fresno celebrate their figs and those around Gilmore showcase their garlic. Mike O'Sullivan reports that the wine-producing region of Temecula offers local vintages in an annual festival where rides on hot-air balloons add to the excitement.
    Video

    Video US Elementary School Offers Living Science Lessons

    Zero is not a good score on a test at school. But Discovery Elementary is proud of its “net zero” rating. Net zero describes a building in which the amount of energy provided by on-site renewable sources equals the amount of energy the building uses. As Faiza Elmasry tells us, the innovative features in the building turn the school into a teaching tool, where kids can't help but learn about science and sustainability. Faith Lapidus narrates.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8954
    JPY
    USD
    109.65
    GBP
    USD
    0.6827
    CAD
    USD
    1.3037
    INR
    USD
    67.037

    Rates may not be current.