US threatens sanctions on countries hosting Russian banks

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The United States has warned countries trading with Russia that they risk secondary sanctions if they allow Russian banks to open local branches to finance the supply of Vladimir Putin’s war machine. The move is aimed at closing shortcuts Russia has used to evade sanctions, particularly by finding obscure ways to pay for dual-use goods needed to produce weapons for its invasion of Ukraine. The Financial Times reports, according to the commentary portal.

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Sanctions against Russia. Photo: Open Source

Wally Adeyemo, deputy U.S. Treasury secretary, said Washington was now prepared to go after countries that allowed Russian banks to open branches in their jurisdictions to circumvent Western sanctions — even if the bank itself was not sanctioned.

“We will go after the branches they opened and other organizations and companies within your jurisdiction that collaborate with them,” Adeyemo said.

He added: “This is not only a warning against doing business with subsidiaries or branches of sanctioned institutions. Countries must stop setting up any Russian branches or subsidiaries, as it will be used to circumvent the sanctions imposed by our alliance.”

The measures are the latest in a series of rule changes aimed at blocking Russian imports of sensitive military goods, making banks around the world wary of participating in trade finance.

It is worth noting that the White House warned foreign financial institutions in December 2023 that they would face the risk of secondary sanctions if they conducted or facilitated transactions related to the Russian military-industrial complex. In June, the list of sanctioned entities was expanded to cover all sanctioned Russian entities.

The threat is believed to pose a major challenge to financing imports of sensitive Russian goods, with official trade data showing a sharp drop in exports of key military materials from China and Turkey to Russia following the decree.

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