US sanctions major Russian financial institutions

The United States introduced additional sanctions against Russia in order to further restrict the country’s ability to access the international financial system. The new designations have also significant consequences for European companies and financial institutions due to the extraterritorial effect of the U.S. sanctions legislation.

On 21 November 2024, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a tightening of sanctions against Russia, introducing measures to further restrict the Kremlin’s ability to access the international financial system. This action is part of the G7 leaders’ commitments to counter Russian aggression in Ukraine, specifically targeting institutions and individuals involved in providing economic and logistical support to the Russian war machine. Given the extraterritorial effectiveness of the U.S. sanctions legislation, the new designations also have significant consequences for European companies and financial institutions.

Designation of Gazprombank and its international subsidiaries

Gazprombank, a major Russian bank, was included in the SDN-List along with six of its foreign subsidiaries located in Luxembourg, Hong Kong, Cyprus, Switzerland and South Africa. According to OFAC, Gazprombank is a crucial hub for Russia’s purchase of military equipment and it handles payments to Russian soldiers, including cash bonuses paid by the Ministry of Defence to encourage the recruitment of volunteers.

Inclusion on the SDN-List, ordered pursuant to Executive Order (E.O.) 14024, results in the freezing of all assets of the bank and its subsidiaries held in the United States or under the control of US persons. U.S.-persons are also prohibited from engaging in transactions with the listed entities. The restrictions extend to all Gazprombank subsidiaries, both in Russia and elsewhere, with a 50% or greater share, even if not explicitly named by OFAC.