Bloomberg News

U.S. Sanctions Hit Rotenberg Banks SMP and InvestCapitalBank

April 28, 2014

SMP Bank OOO and InvestCapitalBank OAO, lenders controlled by associates of Russian President Vladimir Putin, were sanctioned by the U.S. as political tension over Ukraine escalates.

The banks are controlled by brothers Arkady and Boris Rotenberg, who were themselves placed under sanctions by the Obama administration in March. Moscow-based Sobinbank, owned by OAO Bank Rossiya, was also added after its parent was put on the sanctions list last month, according to a statement on the U.S. Treasury’s website today.

The U.S. moved against seven Russian government officials and 17 companies linked to Putin today in a broadening of sanctions against Russia for its annexation of Crimea and its troop build-up near the border with Ukraine.

“This is a loud and clear warning shot across Russia’s bows,” Chris Weafer, a partner at Moscow-based Macro Advisory, said by phone today. “If the U.S. had gone deeper with sectoral sanctions in finance and energy today, maybe Russia would have thought they had nothing to lose and would have crossed the border today.”

OAO Sberbank and VTB Group, Russia’s biggest banks, both state controlled, rallied in Moscow trading. OAO Gazprombank, Russia’s No. 3 lender, and development bank Vnesheconombank were left off the list. Both had been preparing for sanctions, people with knowledge of the matter said last week.

Boyhood Friend

The Rotenberg brothers are business partners, each worth about $3 billion, according to data compiled by Bloomberg. Arkady, 62, a boyhood friend and former judo partner of Putin, gained his fortune by selling pipes and building pipelines for state-run OAO Gazprom (OGZD), the world’s largest natural gas producer.

His companies were awarded more than 227 billion rubles ($6.3 billion) in contracts for the 2014 Sochi Winter Olympics, according to figures compiled from corporate and government filings.

Arkady Rotenberg told the Financial Times in an interview published in 2011 that while he values Putin’s friendship, he’d never abuse it for personal gain. Boris is 57.

SMP Bank, which has about 100 branches in 20 Russian cities, said it saw the risk of sanctions as “high from the outset,” and took steps to minimize losses. The Moscow-based company has agreements with Russian banks to help process card payments and asked clients not to use bank cards to pay for goods outside Russia, it said in an e-mailed statement.

Sobinbank said it had been operating “under the influence of U.S. sanctions” for more than a month since Bank Rossiya was designated on March 21, according to an e-mailed statement from spokeswoman Olga Grishaeva.

‘Toothless Tiger’

“Re-entering the sanctions as an independent legal entity will not affect the future operations of the bank,” Grishaeva said. The Moscow-based lender still fulfills its obligations to customers and partners and operates in “a stable manner,” she said.

Bank Rossiya was founded in 1990 by Yury Kovalchuk, Vladimir Yakunin and Andrey Fursenko, three associates of Putin who are also on the U.S. sanctions list. Kovalchuk holds about 38 percent of the bank, according to a regulatory filing.

InvestCapitalBank didn’t answer calls to its office today. None of the banks sanctioned are publicly traded.

The sanctions are “a toothless tiger,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, said by e-mail. “We did not get a major bank sanctioned which was the biggest risk.’”

Visa Inc. and MasterCard Inc. (MA:US) stopped processing cards for Bank Rossiya last month after the U.S. placed the lender on its sanctions list. Spokesmen for MasterCard and Visa didn’t immediately answer calls or e-mails asking whether the three additional banks would have their cards blocked.

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Steve Bailey


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