US Treasury Secretary Janet Yellen told Reuters that European banks face increasing risks of their business in Russia and that the US is considering tightening its secondary sanctions against banks that support transactions in favour of the Russian war effort.
“We are considering a possible tightening of our sanctions against banks that do business in Russia,” Yellen said in an interview with Reuters. She didn’t want to offer more specific details or name any banks that the sanctions could possibly be directed against.
Speaking on the sidelines of a gathering of G7 finance ministers in northern Italy, Yellen said sanctions related to banks' business in Russia would only be imposed “if there was a reason to do so. But doing business in Russia carries enormous risk,” she added.
Asked if she would welcome a withdrawal of Austria's Raiffeisen Bank International and Italy's UniCredit from Russia, Yellen said: “I think their superiors have advised them to be extremely cautious about what they do there.”
'Exit'
ECB politician Fabio Panetta had clear instructions for the Italian banks on Saturday Tell reporters that the lenders would must “leave” Russia because remaining within the country would cause “reputational problems”.
Raiffeisen is the biggest European lender operating in Russia, followed by UniCredit. Another major Italian lender, Intesa Sanpaolo is working on the sale of its Russian business.
The recent US President Joe Biden Secondary sanctioning authority gives the Treasury Department the authority to exclude banks from the U.S. economic system in the event that they are found to be helping to evade key sanctions against Russian and other corporations related to Moscow's war in Ukraine.
Yellen and other U.S. Treasury officials said the Russian economy is increasingly becoming a “war economy,” making it increasingly difficult to differentiate between civilian and military or dual-use transactions.
The existence of secondary sanctions has already dampened banks' engagement with Russia. However, Yellen has expressed concern that Russia remains to be managing to seek out ways to acquire goods it needs to extend its defense production, citing transactions via China, the United Arab Emirates and Turkey.
Warning letter
At the start of the month, the Ministry of Finance warned Raiffeisen The company said in writing that it could possibly be denied access to the dollar-denominated economic system due to its Russia business, citing a planned deal price 1.5 billion euros ($1.6 billion) with a Russian tycoon who had been hit by sanctions, an individual with access to the correspondence told Reuters.
After the warning abandoned plans for the economic holdings of tycoon Oleg Deripaska, which represents a setback for the bank greater than two years after the invasion of Ukraine.
The pressure underscored Washington's willingness to challenge European banks over their ties to Russia.
In the German financial capital Frankfurt on Tuesday, Yellen said Bank bosses warned to accentuate efforts to make sure compliance with the sanctions against Russia and to stop attempts to avoid them so as to avoid potentially severe penalties.
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