JPMorgan Withholds Russian Embassy Funds: Are Sanctions Paying Off?

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Source: Wanwa / Wikimedia Commons

By annexing Crimea from Ukraine, where it was an autonomous region and home to Russia’s warm-water fleet, Russian President Vladimir Putin set off the worst conflict between East and West since the Cold War. The Group of 7 industrialized nations threatened the country with economic sanctions.

Obama and the European Union have imposed sanctions on around 20 Russian individuals — including Putin’s “personal banker,” Yuri Kovalchuk, who is the largest shareholder of Bank Rossiya; oil tycoon Gennady Timchenko; and retired KGB officer and Putin’s chief of staff, Sergei Ivanov — as part of a broadening of sanctions that targeted Russian government officials and allies of Putin. Bank Rossiya itself was also sanctioned. Meanwhile, U.S. companies have been advised to proceed with caution and make their own risk assessments when conducting business with sanctioned individuals and companies.

With this backdrop, JPMorgan Chase (NYSE:JPM) — the largest financial institution in the United States by assets — blocked a remittance sent from the Russian embassy in Astana, Kazakhstan, to Sogaz Insurance Group, which is partly owned by Bank Rossiya. In a statement posted to its website, the Russian Foreign Ministry in Moscow said the payment was withheld “under the pretext of anti-Russian sanctions imposed by the United States.” Interfering with the transaction was an “absolutely unacceptable, illegal and absurd decision,” Alexander Lukashevich, a ministry spokesman, said in the statement.

Through a source familiar with the dispute, Bloomberg learned that the value of the money transfer was less than $5,000.

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