US considers sanctions on Russian banks

Financial Times

The Obama administration is considering placing Iran-style banking sanctions on selected Russian financial institutions if Moscow were to send troops into eastern Ukraine.

The banking sanctions are one of a series of measures that the administration has been discussing with Congress in recent days as it seeks to find ways to isolate Moscow diplomatically and economically, according to congressional aides and officials.

Banking sanctions are a powerful tool which take advantage of the US’s central role in the international financial system and which have helped place considerable pressure on the Iranian economy over the past two years. If a Russian bank were targeted, then any bank in the world that continues to do business with it can be cut off from the US financial system.

The banking sanctions are being examined as secondary series of measures, which are aimed more at deterring Russia from taking military action in eastern Ukraine. In response to the immediate crisis in Crimea, the administration is considering placing senior Russian officials on a visa ban and asset freeze list. The idea of broader trade and investment sanctions, which secretary of state John Kerry alluded to at the weekend, is only being analysed as a much more distant prospect.

The debate in Washington over what sort of economic tools to use against Russia comes amid some signs of friction between the US and Europe over how quickly – and how aggressively – to apply economic pressure.

European diplomats have expressed frustration that they are portrayed as dithering while the US is seen as decisive, when the stakes are far higher on their side.

Within the EU, attitudes towards tough measures against Moscow vary. Central European nations say that an early threat of sanctions is needed to stop Russian troops moving into eastern Ukraine. They are frustrated that countries such as Italy, Germany and the Netherlands have been far more guarded.
However the sorts of measures that are being considered as an immediate response, including visa bans and asset freezes, are similar on both sides of the Atlantic. While American rhetoric has been tougher, both US and European officials have made it a priority to find “off-ramps” and ways to “de-escalate” the crisis.

“It’s good cop, bad cop,” said a senior EU official. “The major Europeans [UK, France, Germany] said it would be counterproductive to tell Russia they should de-escalate and at the same time issue sanctions.”

The banking sanctions are being held in reserve as one possible option if the crisis in Ukraine escalates. Two sources briefed on the talks said that the idea had some support from both within the administration and in Congress, but that officials recognised that this would be a major step which could have a big economic impact in Europe.

“We have to accept that if we make Russia the target of financial isolation, we will be using the same tactics we have used to go against rogue actors in the past,” said Juan Zarate, a former Treasury and White House official in the George W Bush administration who helped develop some of these financial sanctions. “If we use that playbook, there is no going back. It would put a heavy taint on the Russian banking system.”

If the US wanted to sanction particular Russian banks, one route would be for the Treasury department to allege involvement in money laundering or in supporting organised crime. Experts said that the Treasury might also already have evidence linking Russian banks to financing weapons shipments to Syria, which could be used to make the case for sanctions. The US could also try and link banks to the military operations in Crimea; however this would be a more difficult case to make.

Harry Reid, Senate majority leader, said on Monday that banking sanctions could create havoc for the Russian economy, but that Washington needed to move together with Europe.

“The most important thing is for the US to make sure that we don’t go off without the Europeans,” he said on Monday. “Their interests are really paramount if we are going to do sanctions of some kind. We have to have them on board with us.”

If the crisis deteriorates, however, Congress might be keen to push banking sanctions. “That would be a serious, asymmetric strike,” a Senate aide said about the prospect of financial sanctions. “It would be spine-stiffening for the EU and there might be some blowback, but if the administration were to go down the banking sanctions route, it would be lauded on both sides of the aisle as a decisive response.”

If the Obama administration decides to sanction Russian officials involved in Ukraine intervention, which is the most likely immediate response to the crisis, it might also need the help of Congress. The 2012 Magnitsky Act, which led to sanctions on Russian officials, only applies to human rights violations within Russia. One option under consideration is for the administration to draw up an executive order for new sanctions on Russian officials and then for Congress to pass a resolution supporting the move. займ онлайн займы на карту https://zp-pdl.com/best-payday-loans.php https://zp-pdl.com/online-payday-loans-cash-advances.php срочный займ на карту онлайн