US Treasury Secretary Janet Yellen said that European banks face increased risks in operating in Russia and that the United States is looking to tighten its secondary sanctions on banks found to be aiding transactions for the Russian war effort.
“We are looking forward to a possible tightening of our sanctions on banks doing business in Russia,” Yellen said in an interview with Reuters, but she declined to provide details, and did not specify which banks could be targeted by the sanctions.
Yellen said, on the sidelines of the G7 financial leaders’ meeting in northern Italy, that sanctions related to bank transactions in Russia would only be imposed “if there is a reason to do so, but operating in Russia creates an enormous amount of risk,” Reuters reported.
In response to a question about whether she wanted Austria’s Raiffeisen International Bank and Italy’s UniCredit Bank to withdraw from Russia, Yellen said, “I think their supervisors advised them to be very careful about what they do there.”
European Central Bank policymaker Fabio Panetta issued clear instructions to Italian banks last Saturday, telling journalists that lenders should “get out” of Russia, because staying in the country brings a “reputation problem.”
Raiffeisen is the largest European bank doing business in Russia, followed by UniCredit Bank. While another major Italian bank is working to get rid of its Russian business.
Activating US sanctions
Information indicates that US President Joe Biden’s new secondary sanctions authority gives the Treasury Department the authority to isolate banks from the US financial system if they are found to be helping circumvent the primary sanctions imposed on Russia and other entities, due to Russia’s war on Ukraine.
Yellen and other US Treasury officials said the Russian economy had increasingly become a “war economy,” making it more difficult to distinguish between civilian and military transactions or dual-use transactions.
Earlier this month, the US Treasury Department – according to Reuters – warned Raiffeisen Bank in writing that its access to the dollar-denominated financial system could be denied due to its dealings with Russia, citing a proposed deal worth 1.5 billion euros ($1.6 billion) with the Russian businessman subject to sanctions. For penalties.
After the warning, Raiffeisen dropped plans for an industrial stake linked to tycoon Oleg Deripaska, marking a setback for the bank more than two years after the Ukraine war.
These pressures highlighted Washington’s desire to hold European banks accountable regarding their relations with Russia.
Last Tuesday, from Germany’s financial capital, Frankfurt, Yellen warned bank CEOs to intensify efforts to comply with sanctions imposed on Russia and to stop fraud efforts to avoid the possibility of severe sanctions.
