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Stresa, Italy: U.S. Treasury Secretary Janet Yellen said European banks face growing risks operating in Russia and the United States is considering strengthening secondary sanctions on banks found to be facilitating Russian war dealings.
“We are considering increasing sanctions on banks doing business in Russia,” Yellen said in an interview. But she declined to provide specific details or say which banks the sanctions might target.
Yellen, speaking on the sidelines of a meeting of Group of Seven finance ministers in northern Italy, said sanctions on banks’ operations in Russia would only be imposed “if warranted” but that doing business in Russia carries significant risks, she added.
Asked if she wanted Raiffeisen Bank International and UniCredit to exit Russia, Yellen said: “I believe they have been advised by their superiors to be extremely cautious about what they do in Russia.”
European Central Bank policymaker Fabio Panetta gave Italian banks a clear directive on Saturday, telling reporters they must “leave” Russia because staying in the country would create “reputational problems.”
Raiffeisen Bank is the largest European bank in Russia, followed by UniCredit. Another big Italian bank, Intesa Sanpaolo, is working to sell its Russian business.
President Joe Biden’s new secondary sanctions authority gives the Treasury Department the power to cut banks off from the U.S. financial system if they are found to have helped circumvent primary sanctions targeting Russia and other entities over Moscow’s war in Ukraine.
Yellen and other U.S. Treasury officials said the Russian economy is increasingly becoming a “war economy,” making it more difficult to distinguish between civilian and military, or dual-use, transactions.
The existence of secondary sanctions has stalled bank work with Russia, but Yellen expressed concern that Russia is trying to find ways to obtain the materials it needs to increase military production.
Earlier this month, the Treasury warned Raiffeisen in writing that its access to the dollar-denominated financial system could be cut off because of its business dealings with Russia, citing a proposed 1.5 billion euro ($1.6 billion) deal with a sanctioned Russian tycoon, according to a person who has seen the letter.
After receiving the warning, Leif Eisen abandoned plans for industrial stakes linked to tycoon Oleg Deripaska, marking a setback for the bank more than two years into the war in Ukraine.
The pressure highlights Washington’s willingness to harshly criticize European banks’ ties to Russia.
Yellen warned bank CEOs in Germany’s financial capital Frankfurt on Tuesday to step up compliance with sanctions on Russia and stop circumventing them to avoid potentially harsh penalties. –Reuters
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