US threatens sanctions against countries hosting russian banks

The US is warning countries trading with russia that they risk secondary sanctions if they allow russian banks to set up local branches to finance the supply of goods for Vladimir Putin’s war machine.

The move is aimed at closing workarounds that russia has used to circumvent sanctions, notably by finding obscure means to pay for dual-use goods needed to make arms for its invasion of Ukraine.

Wally Adeyemo, US deputy Treasury secretary, told the Financial Times that Washington was now prepared to pursue countries that let russian banks set up branches in their jurisdictions to evade western sanctions - even if the bank itself was not under sanction.

“We will go after the branch they’re setting up, but also the other entities and the companies in your jurisdiction that work with them,” Adeyemo said.

“It isn’t only a warning toward doing business with subsidiaries or branches of an already sanctioned institution,” he added, saying countries should stop any russian branch or subsidiary from being established “since it is going to be used to circumvent the sanctions that our coalition has put in place”.

The measures are the latest in a series of rule changes designed to frustrate russia’s imports of sensitive war-related goods by making banks across the world wary of becoming involved in the financing of the trade.

Adeyemo said the US was shifting its focus to smaller banks in new countries after an earlier round of pressure prompted bigger lenders in countries such as China, Turkey and the UAE to drop russian counterparties.

Source: Financial Times