By Daphne Psaledakis, Simon Lewis and Matt Spetalnick
WASHINGTON (Reuters) -The United States on Thursday imposed sanctions on Russia in retaliation for its invasion of Ukraine, targeting its two biggest banks and members of the elite in new measures as Washington warned more action could come.
Among the targets were five major Russian banks, including state-backed Sberbank and VTB, the country’s two largest lenders, as well as wealthy individuals and their families. The United States also announced new export control measures.
Washington imposed the new sanctions after Russian forces invaded Ukraine on Thursday, assaulting by land, sea and air in the biggest attack by one state against another in Europe since World War Two.
The U.S. Treasury Department said U.S. banks must sever their correspondent banking ties – which allow banks to make payments between one another and move money around the globe – with Russia’s largest lender, Sberbank, and 25 of its subsidiaries within 30 days.
The restrictions aim to hurt the Russian economy by blocking Sberbank from processing and settling payments within the U.S. financial system.
Sberbank said it was operating normally but was studying the implications of sanctions imposed against it.
Reuters first reported correspondent banking restrictions were part of the package on Sunday.
Daniel Alter, a former general counsel at New York’s Department of Financial Services, said corresponding banks are the “plumbing for international money transfers,” used to enable payments to be sent and received.
“The power of the sanction comes from the fact that most of the world trade at some point is conducted in dollars,” he said.
Officials in Washington also wielded the U.S. government’s most powerful sanctioning tool, adding Russia’s second-largest bank VTB as well as three others – Otkritie, Novikombank and Sovcombank – to the Specially Designated Nationals (SDN) list.
The move effectively kicks the banks out of the U.S. financial system, bans their trade with Americans, and freezes their U.S. assets.
Every day Russian banks conduct about $46 billion worth of foreign exchange transactions globally, 80% of which are in U.S. dollars, the Treasury said, adding that “the vast majority of those transactions will now be disrupted.” The Treasury authorized certain transactions related to energy.
VTB on Thursday said the imposition of Western sanctions on its operations would limit the use of its cards outside Russia and advised customers in other countries to withdraw funds or pay using different banks.
The other banks did not immediately reply to requests for comment. The Russian embassy in the United States also did not immediately reply to a request for comment.
FINANCIAL SECTOR ELITES
The Treasury said it was also imposing sanctions on what it called “financial sector elites,” describing them as senior executives at state-owned banks.
These included Alexander Vedyakhin, First Deputy Chairman of the Executive Board of Sberbank; and Andrey Puchkov and Yuriy Soloviev, high-ranking VTB Bank executives.
Treasury also announced new sanctions against three additional members of families close to Putin.
Among them were Igor Sechin, chief executive officer of oil giant Rosneft and a former deputy prime minister, and his son, deputy head of a department at Rosneft.
After the U.S. government on Tuesday announced it would broaden restrictions on trading of Russian sovereign debt, Washington on Thursday expanded the scope of existing curbs on U.S. persons dealing in the debt and equity of Russia state-owned enterprises.
The debt and equity restrictions will apply to 11 state-owned enterprises, including Sberbank, Gazprom and Gazprombank, and the Russian Agricultural Bank, among others.
The Treasury issued eight general licenses to ensure that the latest sanctions hit their targets and minimize unintended consequences.
“The sanctions and license package has been constructed to account for the challenges high energy prices pose to average citizens” and does not bar banks from processing energy-related payments, the Treasury said.
The licenses permit certain transactions related to international organizations, agricultural and medical commodities, the COVID-19 pandemic, energy, and other dealings.
The Biden administration also leveled sanctions against 24 banks, defense companies and individuals in Belarus, a staging ground from which Russian forces advanced south toward Kyiv after conducting what were cast as military exercises.
(Reporting by Daphne Psaledakis, Simon Lewis, Jonathan Landay, Doina Chiacu and Alexandra Alper in Washington and Michelle Nichols and Karen Freifeld in New York; Editing by Michelle Price and Daniel Wallis)
