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31 Jul, 2014 15:48

EU sanctions some of Russia's biggest banks, including #1 Sberbank

The European Union has imposed sectorial sanctions on five Russian banks, including the country’s biggest, Sberbank, as part of economic steps that Europe, along with the US, have taken against Moscow over the crisis in Ukraine.

EU adds 8 individuals, 3 Russian companies to sanctions list over Ukraine crisis

The list, published Thursday, includes Sberbank, VTB Bank, Gazprombank, Vnesheconombank (VEB) and Russian Agriculture Bank (Rosselkhozbank).

These financial entities will be banned from raising capital on the EU’s capital markets.

The sanctions – targeting banks with state ownership of over 50 percent – enter into force on August 1 and will be valid for one year. The decision can be reviewed after three months.

“In order to restrict Russia's access to EU capital markets, EU nationals and companies may no more buy or sell new bonds, equity or similar financial instruments with a maturity exceeding 90 days, issued by major state-owned Russian banks, development banks, their subsidiaries outside the EU and those acting on their behalf. Services related to the issuing of such financial instruments, e.g. brokering, are also prohibited,” the EU Council said in a statement.

Agreed restrictive measures in view of #Russia's role in Eastern #ukraine now published in the EU official journal: http://t.co/a5qkjM6OXT

— EU Council Press (@EUCouncilPress) July 31, 2014

It excludes EU subsidiaries of the Russian banks.

Only three of the banks on the sanctions list have subsidiaries in Europe: Sberbank, VTB and Gazprombank. Sberbank Europe AG (former Volksbank International) operates a network of banks in Central and Eastern European countries.

Sberbank is the largest bank in Russia and Eastern Europe, and the third-largest in Europe. The bank caters to over 106 million customers in Russia alone, while over 11 million people use its services abroad.

Sberbank’s majority shareholder is Russia’s Central Bank.

The bank is the key lender to the Russian economy. According to the bank’s estimates, as of the end of 2013, Sberbank is the biggest receiver of deposits in Russia, with 43.3 percent of retail deposits, 32.7 percent of retail loans and 32.1 percent of loans to corporate customers.

In 2013 Sberbank was ranked the world’s 63rd most valuable global brand by Brand Finance. The Sberbank brand was valued at $14.16 billion and is recognized as the most valuable brand in Russia.

Gazprombank said in a statement that the new sanctions do not affect the bank’s financial stability and work. The bank continues to operate as usually providing services to both individuals and legal entities and transactions both in roubles and foreign currencies proceed without delays. The measures taken by the EU are almost the same as those imposed earlier by the US, the bank said.

“In these circumstances, Gazprombank continues to completely fulfill its liabilities to investors, depositors and creditors,” the statements published on the bank’s website reads.

In response to the sanctions, VTB said that it strongly disapproves of the EU’s decision, adding that the bank and all its subsidiaries will continue to operate as usual.

A board advertising VEB bank (Vnesheconombank) is pictured outside its office in Moscow (Reuters / Sergei Karpukhin)

Such actions contradict Europe’s democratic values, showing they have gone against their own interests to do the bidding of their senior colleagues from across the ocean,” the bank said in a statement. “These decisions are incompatible with the core principles and values of the free market, and discriminate against VTB as well as international investors. European authorities have de facto granted themselves the right to decide for investors where they may invest their own funds.”

Earlier this week, Washington added new names to its list of sanctioned Russia-affiliated entities, including Russian Agriculture Bank and VTB, the second largest bank in the country. Sberbank was left untouched by the Americans.

Russia's Central Bank promised Wednesday to support financial institutions hit by Washington sanctions. On Thursday, as the EU made its announcement, the regulator said it was ready to offer hand to banks facing restrictions from the EU.

Banks affected by the EU sanctions are capable of coping with problems on their own,” the Central Bank’s press service told Itar-Tass. “Their foreign currency position is well-balanced. But if there are extra risk factors, the [Central] Bank of Russia is ready to offer liquidity under the existing instrument.

Arms, equipment exports & imports targeted

Additionally, the EU imposed an embargo on the import and export of arms and related material to and from Russia.

Also, exports of “certain energy-related equipment and technology” to Russia will be subject to prior authorization by EU authorities.

“Export licenses will be denied if products are destined for deep water oil exploration and production, Arctic oil exploration or production and shale oil projects in Russia,” the EU said.

The sanctions will only apply to new contracts and will not affect deals finalized before August 1.

The French contract with Russia on the construction and shipment of the Mistral helicopter carrier warships will not be canceled under the new restrictions, since it was signed in 2011.

The EU Committee of Permanent Representatives approved its toughest yet sanctions against Russia on Tuesday. On Thursday, the package was adopted by the EU Council and published in the Official Journal of the 28-member state union.

Moscow slammed the move, saying it was disappointed by the EU’s inability to act independently from the US in the international arena.

We feel ashamed for the European Union who, after long searching for a unified voice is now speaking with Washington’s voice, having practically abandoned basic European values, including the presumption of innocence,” the Russian Foreign Ministry said in a statement Wednesday.