The EU’s next package of sanctions against Russia is drawing near, and this time it’s likely to hit Russia’s largest bank as well. “We continue to look at the banking sector, especially Sberbank, which alone accounts for 37 percent of the Russian banking sector,” Commission President Ursula von der Leyen said in an interview. According to experts, action against Sberbank is overdue: “There is no good reason for the EU not to do this immediately,” write sanctions experts Nicolas Véron and Joshua Kirschenbaum a post for the Brussels think tank Bruegel.
The US government already imposed a blockade on Sberbank and the number four in the Russian market, Alfa-Bank, two weeks ago. Washington froze assets and banned dealings with the corporations. This means that six of the ten largest financial institutions in Russia are now affected by such a ban in the United States. The EU, on the other hand, has so far only sanctioned four financial institutions from the top 10 in this way; Sberbank and Alfa-Bank were spared. Véron and Kirschenbaum estimate that only a quarter of the Russian banking market is affected by the punitive measures in Brussels based on the assets of the institutes.
But von der Leyen’s statement suggests that the EU will soon catch up with the US, at least on Sberbank. When the Commission to the governments of the Member States the sixth sanctions package will propose is open. It certainly won’t happen again this week. Finally, the authority also wants to take action against oil imports from Russia. And this debate could drive up the price of the commodity – and thus the prices at the gas stations. The Commission, in turn, will want to avoid this before the French vote for their president in a runoff on Sunday. Because motorists’ anger would harm the pro-Europe incumbent Emmanuel Macron and benefit his EU-sceptical challenger Marine Le Pen.
In addition, when it comes to restrictions on oil, Brussels must take into account that some states cannot do without it immediately. According to the federal government, Germany, for example, will not be independent of imports until the end of the year. This suggests that an embargo will come gradually or only with some advance notice. That recently announced coal embargo also only applies from August so that the EU countries can adapt.
Putin can sell his oil elsewhere
Another problem is that Russia’s President Vladimir Putin could simply sell the scorned oil in Asia – von der Leyen pointed this out in the interview: “What shouldn’t happen is that Putin charges even higher prices for supplies in other markets that would otherwise go to the EU. That is why we are currently developing clever mechanisms so that oil can also be included in the next sanctions step,” said the German.
So far, seven banks have been affected by the EU’s financial sanctions – plus the central bank. Deals with the septet are forbidden, besides, they are from Swift excluded, the worldwide payment system whose provider is based in Brussels. But only four of the seven banks belong to the top 10, and with Sberbank the mighty number one is missing.
One argument against excessive sanctions is always that Europe’s gas importers depend on some Russian banks to pay their bills. Bruegel expert Véron does not accept this objection to a Sberbank ban. “Complete nonsense” is that, he says in an interview with the SZ. Gas buyers could also use a much smaller bank that isn’t covered by the embargo, the Frenchman explains. Or the blockades against Sberbank and others could include narrowly defined exceptions to allow gas shipments to the EU or – on humanitarian grounds – food sales to Russia. Véron also considers it unlikely that a Sberbank ban would have serious consequences for financial institutions associated with business in Europe and thus endanger the stability of the financial system.
Moscow continues to receive foreign exchange – thanks to oil and gas
Although the political adviser calls for fines against Sberbank, he also warns against overestimating the effect of these blockades on commercial banks. A much harder hit to Russia’s economy was the Western sanctions against the Russian central bank, he says. Because the central bank can no longer use its lavish foreign exchange reserves. Among other things, this has bad consequences for the supply of credit to companies in the country. “However, Russia still receives hard currency from oil and gas sales,” complains Véron. “The most effective would therefore be an oil and gas embargo.”