Sovcombank Unusual Move: Sovcombank, a major Russian private lender, finds itself in a unique position as it navigates the complexities of international sanctions. Placed under sanctions by the U.S., UK, and the European Union following Russia’s military operations in Ukraine, Sovcombank has now submitted an intriguing request to the U.S. Treasury. The bank has sought a license to make membership payments to the United Nations Environment Programme Finance Initiative, even as its activities face restrictions.
The situation arose after the U.S. Treasury’s Office of Foreign Assets Control (OFAC) designated Sovcombank on its Specially Designated Nationals (SDN) list. This move effectively excluded the bank from the U.S. financial system, prohibited trade with American entities, and froze its U.S. assets. In response, Sovcombank is exploring avenues for special exemptions for specific transactions by Russian banks.
Mikhail Avtukhov, the head of Sovcombank’s corporate and investment banking division, confirmed the submission of the license application. Speaking on the sidelines of a financial forum in Moscow, Avtukhov expressed the bank’s readiness to comply with international initiatives despite facing numerous challenges. He mentioned having foreign currency funds earmarked for UN payments and acknowledged the absence of a response from OFAC at that point.
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The bank’s initiative not only showcases Sovcombank’s commitment to international organizations but also underscores its efforts to engage in dialogues with relevant bodies, including the UN. Avtukhov emphasized that despite the difficulties faced in the past year, the bank has not suspended its membership in international organizations. He further mentioned ongoing challenges related to making payments within the UN framework for Russian participants but noted the understanding shown by the UN in this regard.
Avtukhov addressed potential concerns about the bank exploring alternatives to dollar or euro transactions by stating that Sovcombank is committed to following standard payment procedures. He clarified that the bank does not intend to be perceived as attempting to circumvent sanctions and prefers adhering to established payment norms.
The U.S. Treasury, when approached for comment, declined to provide any insights into the ongoing situation. The uncertainty surrounding the response from OFAC adds an additional layer to Sovcombank’s efforts, raising questions about the potential for exemptions and the broader implications of sanctions on international collaborations.
As Sovcombank seeks approval for its license application, the financial industry will closely watch the developments, considering the geopolitical context and the evolving landscape of international financial relations amidst sanctions and geopolitical tensions.
Our Reader’s Queries
Is Uralsib bank under sanctions?
Uralsib Bank faced sanctions from both the United States and the United Kingdom on February 24, 2023, due to their involvement in the 2022 Russian invasion of Ukraine. The UK further intensified the sanctions in December 2023 by prohibiting correspondent banking relationships.
Which Russian banks are sanctioned?
JSC Bank Novikombank, a Russian lender, is currently facing an asset freeze, trust services sanctions, and prohibitions on correspondent banking. Along with JSC Bank Novikombank, other Russian banks such as VTB Bank PJSC, Gazprombank JSC, Russian Agricultural Bank, PJSC Rosbank, and JSC Tinkoff Bank are also prohibited from having correspondent banking relationships.
Can a US company do business with Russia?
It’s important for non-Russian individuals to understand that engaging in business with technology and electronics companies from Russia can lead to potential sanctions. The Office of Foreign Assets Control (OFAC) has recently identified over 30 companies that import, ship, or produce electronics components, semiconductors, and microelectronics in or to Russia. It’s crucial to be aware of these risks before conducting any business with these companies.
Is Gazprombank under sanctions?
As of February 24, 2022, Gazprombank (GPB) has been flagged by OFAC and is now subject to prohibitions under Directive 3 of E.O.