Washington will ‘go after’ branches used by Moscow to circumvent trade restrictions, US Deputy Treasury Secretary Wally Adeyemo said.
The US is warning countries that trade with Russia that they risk secondary sanctions if they allow Russian banks to open local branches to finance the supply of goods to Vladimir Putin’s war machine.
The move is aimed at closing Russia’s workarounds to circumvent sanctions, in particular by finding obscure ways to pay for dual-use goods needed to make weapons for its invasion of Ukraine.
US Deputy Treasury Secretary Wally Adeyemo told the Financial Times that Washington is now prepared to pursue countries that allow Russian banks to set up branches in their jurisdictions to evade Western sanctions – even if the bank itself is not under sanctions.
‘In addition to the branch they set up, we will also go after other organisations and companies working with them in your jurisdiction,’ Adeyemo said: ‘This is not just a warning against doing business with subsidiaries or branches of an already sanctioned organisation.’
Adeyemo said countries should prevent the establishment of any Russian branches or subsidiaries ‘because they would be used to circumvent sanctions imposed by our coalition’.
These measures are the latest in a series of rule changes designed to curb Russian imports of sensitive war-related goods by making banks around the world wary of being involved in financing this trade.
In December 2023, the White House issued a decree warning foreign financial institutions that they were at risk of secondary sanctions if they conducted or facilitated transactions related to the Russian military-industrial complex. This was expanded in June to include all sanctioned Russian entities.
Russia is struggling with payment channels following the latest sanctions against companies such as VTB Bank Shanghai, the sole representative office of a Russian bank in China, which the US blacklisted in June.
Andrei Kostin, CEO of VTB, underlined that they are struggling to find new loopholes: ‘We realised that no matter what steps we take, the reaction of the West is very fast. As soon as we do something anywhere, a delegation of 10 people comes and starts beating local officials over the head to stop us,’ he said: ‘The situation is getting worse every day but we are still sorting it out and the goods are flowing.’
Adeyemo said the US was shifting its focus to smaller banks in new countries after earlier crackdowns prompted major creditors in countries such as China, Turkey and the UAE to drop their Russian counterparts.
Sanctions-hit Russian state bank VTB receives $1.8 billion in aid
