Economy
Europe, United States expand sanctions against Russia over Ukraine
EU sanctions
“The European Council regrets that the requested steps it set out in its 27 June conclusions have not been adequately taken. As a result, the European Council agrees to expand the restrictive measures, with a view to targeting entities, including from the Russian Federation, that are materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence," the Council said in a statement on 16 July.
It tasks the Council to “adopt the necessary legal instruments and to decide by the end of July on a first list of entities and persons, including from the Russian Federation, to be listed under the enhanced criteria."
It also asks to “consider the possibility of targeting individuals or entities who actively provide material or financial support to the Russian decision-makers responsible for the annexation of Crimea or the destabilisation of Eastern-Ukraine."
The European Council has also requested the European Investment Bank (EIB) to suspend the signature of new financing operations in the Russian Federation.
Additionally, it has invited the Commission “to re-assess EU-Russia cooperation programmes with a view to taking a decision, on a case by case basis, on the suspension of the implementation of EU bilateral and regional cooperation programmes." However, it noted that projects dealing exclusively with cross-border cooperation and civil society will be maintained.
Sanctions by the U.S.
“In response to Russia’s continued attempts to destabilize eastern Ukraine and its ongoing occupation of Crimea", the U.S. Department of the Treasury on Wednesday imposed a broad-based package of sanctions on entities in the financial services, energy, and arms or related materiel sectors of Russia, and on those undermining Ukraine’s sovereignty or misappropriating Ukrainian property. More specifically:
“These actions do more than build upon previous steps to impose costs on separatists and the Russian government," the Treasury said in a press release.
In televised comments Thursday, Putin said the sanctions are “driving into a corner" relations between the two countries as well as the interests of American companies and “the long-term national interests of the U.S. government and people."
Putin warned Washington that the sanctions will backlash against American companies working in Russia.
“By imposing sanctions on entities within the financial services and energy sectors, Treasury has increased the cost of economic isolation for key Russian firms that value their access to medium- and long-term U.S. sources of financing. By designating firms in the arms or related materiel sector, Treasury has cut these firms off from the U.S. financial system and the U.S. economy."
“Russia has continued to destabilize Ukraine and provide support for the separatists, despite its statements to the contrary," said Under Secretary for Terrorism and Financial Intelligence David S. Cohen.
Hungary indirectly affected
The sanctions against VEB make Hungary indirectly affected, as the Russian bank is interested in several areas in the country:
1. The bank will possibly be involved in a EUR 10 billion Russian loan to Hungary, for the expansion of the country’s only nuclear power plant in Paks (100 km south of Budapest on the Danube river). According to reports, the Russian government requested VEB (and Rosatom) in March to start talks on signing an inter-governmental agreement on the loan with Hungary.
2. Vneshekonombank is the majority owner of Dunaújváros-based steel works ISD Dunaferr. It confirmed a previous decision in early February that the company is not for sale.
This is what could hurt Russian companies
Today, U.S. Treasury Secretary Jacob J. Lew determined that persons operating within Russia’s financial services sector may now be subject to targeted sanctions. Following Secretary Lew’s determination, Treasury imposed measures prohibiting U.S. persons and persons within the United States from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity for Gazprombank OAO, the bank connected with Russia’s gas-export monopoly and state-owned development lender VEB, their property, or their interests in property. They will also be prohibited from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity for Russia’s biggest oil producer OAO Novatek and Rosneft, the largest petroleum company.
As a practical matter, this step will close the medium- and long-term U.S. dollar lending window to these banks, and will impose additional significant costs on the Russian Government for its continued activities in Ukraine.
“The European Council regrets that the requested steps it set out in its 27 June conclusions have not been adequately taken. As a result, the European Council agrees to expand the restrictive measures, with a view to targeting entities, including from the Russian Federation, that are materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence," the Council said in a statement on 16 July.
It tasks the Council to “adopt the necessary legal instruments and to decide by the end of July on a first list of entities and persons, including from the Russian Federation, to be listed under the enhanced criteria."
It also asks to “consider the possibility of targeting individuals or entities who actively provide material or financial support to the Russian decision-makers responsible for the annexation of Crimea or the destabilisation of Eastern-Ukraine."
The European Council has also requested the European Investment Bank (EIB) to suspend the signature of new financing operations in the Russian Federation.
Additionally, it has invited the Commission “to re-assess EU-Russia cooperation programmes with a view to taking a decision, on a case by case basis, on the suspension of the implementation of EU bilateral and regional cooperation programmes." However, it noted that projects dealing exclusively with cross-border cooperation and civil society will be maintained.
Sanctions by the U.S.
“In response to Russia’s continued attempts to destabilize eastern Ukraine and its ongoing occupation of Crimea", the U.S. Department of the Treasury on Wednesday imposed a broad-based package of sanctions on entities in the financial services, energy, and arms or related materiel sectors of Russia, and on those undermining Ukraine’s sovereignty or misappropriating Ukrainian property. More specifically:
- Treasury imposed sanctions that prohibit U.S. persons from providing new financing to two major Russian financial institutions (Gazprombank OAO and VEB) and two Russian energy firms (OAO Novatek and Rosneft), limiting their access to U.S. capital markets;
- Treasury designated eight Russian arms firms, which are responsible for the production of a range of materiel that includes small arms, mortar shells, and tanks;
- Treasury designated the “Luhansk People’s Republic" and the “Donetsk People’s Republic," which have asserted governmental authority over parts of Ukraine without the authorization of the Government of Ukraine; and Aleksandr Borodai, the self-declared “prime minister" of the Donetsk People’s Republic, for threatening the peace, security, stability, sovereignty, and territorial integrity of Ukraine;
- Treasury designated Feodosiya Enterprises, a key shipping facility in the Crimean peninsula, because it is complicit in the misappropriation of state assets of Ukraine; and
- Treasury designated four Russian government officials, including Sergey Beseda, a senior Russian Federal Security Service official.
“These actions do more than build upon previous steps to impose costs on separatists and the Russian government," the Treasury said in a press release.
In televised comments Thursday, Putin said the sanctions are “driving into a corner" relations between the two countries as well as the interests of American companies and “the long-term national interests of the U.S. government and people."
Putin warned Washington that the sanctions will backlash against American companies working in Russia.
“By imposing sanctions on entities within the financial services and energy sectors, Treasury has increased the cost of economic isolation for key Russian firms that value their access to medium- and long-term U.S. sources of financing. By designating firms in the arms or related materiel sector, Treasury has cut these firms off from the U.S. financial system and the U.S. economy."
“Russia has continued to destabilize Ukraine and provide support for the separatists, despite its statements to the contrary," said Under Secretary for Terrorism and Financial Intelligence David S. Cohen.
Hungary indirectly affected
Vneshekonombank (VEB)
VEB is a Russian state-owned financial institution that acts as a development bank and payment agent for the Russian government. It was formed June 8, 2007, pursuant to Russian federal law and is the legal successor to Vneshekonombank of the USSR, which was a specialized Russian state bank. VEB’s supervisory board is chaired by the Russian prime minister, and the chairman of the bank is appointed by the Russian president.
VEB acts as an agent for the Russian Government for the purposes of accounting, servicing, and repaying the sovereign debts of the former USSR and Russia; accounting, servicing, and repaying government loans issued by the former USSR and Russia to foreign borrowers; collecting debts from legal entities of Russia and municipal governments; providing and executing state guarantees of Russia and monitoring projects implemented by Russia with involvement of international financial institutions. (Source: U.S. Treasury)
VEB acts as an agent for the Russian Government for the purposes of accounting, servicing, and repaying the sovereign debts of the former USSR and Russia; accounting, servicing, and repaying government loans issued by the former USSR and Russia to foreign borrowers; collecting debts from legal entities of Russia and municipal governments; providing and executing state guarantees of Russia and monitoring projects implemented by Russia with involvement of international financial institutions. (Source: U.S. Treasury)
The sanctions against VEB make Hungary indirectly affected, as the Russian bank is interested in several areas in the country:
1. The bank will possibly be involved in a EUR 10 billion Russian loan to Hungary, for the expansion of the country’s only nuclear power plant in Paks (100 km south of Budapest on the Danube river). According to reports, the Russian government requested VEB (and Rosatom) in March to start talks on signing an inter-governmental agreement on the loan with Hungary.
2. Vneshekonombank is the majority owner of Dunaújváros-based steel works ISD Dunaferr. It confirmed a previous decision in early February that the company is not for sale.
This is what could hurt Russian companies
Today, U.S. Treasury Secretary Jacob J. Lew determined that persons operating within Russia’s financial services sector may now be subject to targeted sanctions. Following Secretary Lew’s determination, Treasury imposed measures prohibiting U.S. persons and persons within the United States from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity for Gazprombank OAO, the bank connected with Russia’s gas-export monopoly and state-owned development lender VEB, their property, or their interests in property. They will also be prohibited from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity for Russia’s biggest oil producer OAO Novatek and Rosneft, the largest petroleum company.
As a practical matter, this step will close the medium- and long-term U.S. dollar lending window to these banks, and will impose additional significant costs on the Russian Government for its continued activities in Ukraine.
