Too big to sanction? A large Russian bank is still operating freely because it helps Europe get Russian gas

Ukraine is urging the United States and European Union imposed tougher sanctions on one of Russia’s biggest banks, Gazprombank, which is still able to operate freely around the world because of its central role in Russia’s gas trade. Moscow.

UkraineThe government’s government says the bank, set up to service Russia’s state gas company Gazprom, is helping control the Kremlin’s war in Ukraine.

“The US and Europe should sanction Gazprombank, not only for its role in helping Russia accumulate revenue from its energy sales, but because Gazprombank is directly involved in supporting the Russian military, companies the state and other organizations are perpetuating the invasion of Ukraine“Andriy Yermak, chief of staff to Ukrainian President Volodymyr Zelenskyy, told NBC News.

Gazprombank, Russia’s third-largest bank, has been exempted from the kind of severe restrictions many other Russian lenders face. It continues to monitor dollar and euro transactions, and remains part of the international SWIFT banking messaging system.

The question of whether to tighten sanctions on Gazprombank reveals the dilemma facing Western governments as they try to squeeze the Russian economy in the wake of the invasion of Ukraine. Europe remains heavily dependent on Russian natural gas and uses Gazprombank to process payments for its gas imports. Most European governments remain reluctant to sanction the bank and risk cutting off the flow of natural gas entirely, Western officials and experts say.

Ukraine has pressed the United States to extend sanctions and has shared intelligence about Russia’s alleged actions with American officials as part of that operation.

According to Ukraine’s intelligence services, Gazprombank handles the payment of salaries to at least some of the Russian troops that took part in the invasion of Ukraine, as well as payments to the families of military personnel killed in the war.

Ukraine said there were also indications that the bank was involved in the purchase of military equipment. In one case, a Russian military officer from a tank division operating in eastern Ukraine used Gazprombank to arrange the purchase of two quadcopters drones, according to a Ukrainian intelligence report issued by a Ukrainian intelligence agency. NBC News obtained.

Gazprombank, which has representative offices in China, India and Europe, may also be involved in efforts to circumvent Western sanctions, possibly giving other entities access to foreign currency or allows the purchase of equipment that could be used for potential military purposes, according to Ukrainian intelligence agencies. They have referred those concerns to US officials.

The Russian federal agency that administers civil aid and foreign cultural exchange, or Rossotrudnichestvo, has explored the possibility of using Gazprombank to arrange a cash transfer to one of its offices in Portugal. Nah, according to intelligence agencies.

Rossotrudnichestvo did not respond to a request for comment.

The Biden administration declined to comment on the information cited by Ukraine’s intelligence services.

Gazprombank did not respond to a request for comment.

A Treasury official said the Biden administration was monitoring Gazprombank’s activities and did not rule out any future action against the bank.

“We continue to monitor Gazprombank to see if it does business with sanctioned entities,” the official said.

“So far, I think we have not made a decision to impose full containment sanctions on Gazprombank,” the official said, adding that a range of options remained to be had. open.

The purpose of the US financial sanctions is to “deny Russia from accessing the revenue it needs to support its economy and build a military-industrial complex” and disrupt supply chains for the industry. the country’s defense industry “to make it more difficult for them,” the finance ministry official said.

Agathe Demarais, a former French treasury official, said Europe would be in a “difficult position” if Gazprombank was excluded from the international financial system.

“The US knows that if it puts Gazprombank under US sanctions, it will cause huge problems in the EU, send the eurozone into a deep recession and it will create a huge rift between the EU and the EU. America on the sanctions front,” said Demarais, now global forecasting director at the Economist Intelligence Unit. And the Biden administration wants to avoid clashes with European allies, she said.

Some sanctions experts say Gazprombank may try to avoid risky transactions that could attract the attention of US or European authorities and jeopardize the bank’s vital links in the world. the transfer of revenue from natural gas to Moscow.

Although Washington has not frozen the bank’s assets or blocked dollar-denominated transactions, the Treasury Department last month imposed sanctions on 27 of its executives.

In February, the United States introduced punishment about a Gazprombank board member, Sergei Sergeevich Ivanov, the head of a Russian state-owned diamond mining company. He is also the son of a close ally of Putin and a senior Russian government official, according to the Finance Ministry.

In 2014, after Russia occupied Ukraine’s Crimea peninsula, the US limited limitations on Gazprombank, prohibiting US banks from providing medium or long-term financing to lenders.

In Switzerland, financial authorities in 2018 forbidden Gazprombank’s Swiss branch does not accept new private clients, citing the bank’s violation of anti-money laundering rules and its inability to audit transactions.

FINMA, the Swiss financial regulator, said it continued to monitor Gazprombank Switzerland but declined to comment further.

A spokesman for Vinzenz Mathys said: “We can confirm that we are in close contact with Gazprombank Switzerland.

Last year, Europe depended on Russia for about 45% of its natural gas. Europe has reduced its imports of Russian gas this year, and the EU has set a target of cutting imports by two-thirds by the end of the year.

But Europe is still heavily dependent on Russian gas and, This week, Moscow cuts the supply of natural gas to Europepromote conservation measures as governments prepare for winter.

Russian officials say the supply cuts are due to maintenance issues, but Germany accuses the Kremlin of using energy as a political weapon.

“Sanctions against Gazprombank would be tantamount to a ban,” said Simone Tagliapietra, senior fellow at Bruegel, a Belgium-based think tank focused on the European economy. Russian gas transport.

“First, the EU needs to implement the embargo on Russian oil, which will start at the end of the year.”

The EU plans to cut Russia’s oil imports by 90% by the end of 2022.