Once, America’s great banks had big dreams. Dreams as big as Russia itself. They would help the recently-defaulting giant, just years after having thrown off the shackles of communism, learn the ways and means of Western capitalism, binding the country to the new liberal geopolitical order and, of course, making buckets of rubles along the way.
JPMorgan said it was “unwinding Russian business” and wouldn’t pursue new ventures there. The bank, which holds assets for some clients in the country, has more than 100 workers there, but the business was not big enough to rank among its top 20 markets.
Citigroup Inc.’s roughly 3,000 workers there give it by far the largest presence of any major U.S. bank in Russia. The company said Wednesday it’s assessing operations there. It previously announced efforts to exit its consumer business there, and is now operating it “on a more limited basis given current circumstances and obligations,” Edward Skyler, executive vice president of global public affairs, said in a statement.
Of course, as the Ukrainians have learned over the past decade, Vladimir Putin does not take well to being dumped.
International banks are owed more than $121 billion by Russian entities, according to the Bank for International Settlements, which suspended Russia's membership on Thursday. European banks have over $84 billion total claims, with France, Italy and Austria the most exposed, and US banks owed $14.7 billion…. Societe Generale "has more than enough buffer to absorb the consequences of a potential extreme scenario, in which the group would be stripped of property rights to its banking assets in Russia," it said.
In its annual report for 2021 released on Thursday, [Credit Suisse] revealed a gross credit exposure to Russia of 1.57 billion Swiss francs, almost $1.7 billion. Sanctions placed on Russian businesses and individuals following the country’s invasion of Ukraine means that it is uncertain if these parties will be able to pay back their international loans…. The $1.7 billion is Credit Suisse’s gross exposure, although its net exposure is somewhat smaller at 848 million Swiss francs, or $912 million…. Neither the gross nor the net sum includes the 195 million Swiss francs’ worth of assets that Credit Suisse holds in Russia, which could also be affected by sanctions.
BlackRock, the world’s largest asset manager, has taken about $17bn in losses on its Russian securities holdings because of the attack on Ukraine…. Other large asset managers are also having to write down billions of dollars in exposure. Pimco, for example, held at least $1.5bn of sovereign debt and about $1.1bn of bets on Russia via the credit-default swap market before the war. Ashmore and Western Assets funds also have exposure to Russian debt, according to Morningstar, as does Janus Henderson at a much lower level.
Putin on Thursday backed a plan floated earlier this week by a senior member of his dominant United Russia party to nationalize the operations of Western companies exiting the country…. Washington warned against a nationalization effort. “Any lawless decision by Russia to seize the assets of these companies will ultimately result in even more economic pain for Russia” and may invite legal action, White House press secretary Jen Psaki tweeted Thursday….
One of the most vulnerable countries to any Russian nationalization is Germany….
"We are often asked why we are not withdrawing completely from Russia. The answer is that this would go against our values," Chief Executive Christian Sewing said in a note to Deutsche Bank staff on Thursday…. Asked about the criticism of its decision to stay, Deutsche Bank repeated a statement it would comply with sanctions and that it was "monitoring the situation closely", adding that it may adapt its approach "as appropriate".
[Eisler Capital’s] board decided Thursday to redeem all capital affected by sanctions imposed by the U.S., European Union or U.K., according to an internal memo seen by Bloomberg. As a result, Eisler Capital no longer has direct or indirect exposure to Russian capital in any of its funds.
And this situation?
Biden said the US, along with the G7 and European Union, will call for revoking "most favored nation" status for Russia, referred to as permanent normal trade relations in the US…. Biden announced the US would ban goods from several signature sectors of Russia's economy, including seafood, vodka and non-industrial diamonds. The White House says this will deny Russia more than $1 billion in export revenues.
The President will also sign an executive order ending the exportation of luxury items -- including spirits, tobacco, clothing, jewelry, cars and antiques -- to Russia.
Of course, one bank needn’t worry much about any of that, because the West needs it more than it wants to grind Vladimir Putin to dust.
European Union diplomats say they kept Gazprombank free from sanctions because payments on gas imports need to keep going…. Gazprombank also avoided a ban on Swift, the financial-messaging infrastructure that links the world’s banks, which is being cut off for seven other Russian banks…. Sparing Gazprombank from sanctions could open the door for the lender to become a conduit for businesses to and from Russia, a way to work around sanctions imposed on peers, according to sanctions consultants. Sanctioned VEB had an 8% stake in Gazprombank as of September, according to Gazprombank’s most recent results report.
Speaking of not worrying about sanctions, let’s look at another country once disastrously invaded by Russia.
Ahmad Zia Agha, more commonly known in Afghanistan as Noor Ahmad Agha, is a senior Taliban military and financial leader sanctioned for allegedly managing funds intended for bombs and for distributing money to Taliban commanders and associates abroad. The U.S. has labeled him a specially designated global terrorist. He was appointed five months ago as the first deputy governor of the Da Afghanistan Bank…. His appointment is expected to fuel worries among many Western policy makers about providing the Taliban-run government access to foreign financing, including billions of dollars of funds at the World Bank and $7 billion in foreign currency reserves held in the U.S.
Wall Street Joins the Unbanking of Russia [DeakBook]
JPMorgan and Goldman Lead Wall Street’s Retreat From Russia [Bloomberg]
Ukraine Invasion Dashes U.S. Banks’ Russia Hopes [WSJ]
Russia owes Western banks $120 billion. They won't get it back [CNN Business]
Credit Suisse was caught trying to shred evidence of Russian loans backed by yachts. The bank just revealed it has given $1.7 billion to the country’s borrowers [Fortune]
BlackRock funds hit by $17bn in losses on Russian exposure [FT]
Pressure Mounts for Western Companies Leaving Russia [WSJ]
Deutsche Bank rebuked over remaining in Russia as others quit [Reuters]
Ex-Goldman Executive’s Hedge Fund Purges All Cash Tied to Russians [Bloomberg]
Biden calls for suspending normal trade relations with Russia and will ban imports of vodka and seafood [CNN]
Gazprombank: The Big Russian Lender That Dodged Western Sanctions [WSJ]
Sanctioned Taliban Financier Holds Leadership Post at Afghan Central Bank [WSJ]
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