Before Russia invaded Ukraine, US officials listed Russian banks as potential sanctions targets. Gazprombank was among the candidates.
In the end, Russia’s third-largest bank remained largely intact. The largest, Sberbank,
was cut off from access to the US dollar. US banks and corporations are barred from doing business with the second largest, VTB, and another major lender, VEB. All four are state-controlled.
Gazprom Bank is special. A bank created to meet the financial needs of the Russian company Gazprom, one of the largest exporters of natural gas in the world, Gazprombank is an essential part of the gas trade. He also did business with close associates of President Vladimir Putin and was implicated in money laundering issues in Europe.
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Gazprombank’s Moscow press office did not respond to requests for comment.
European Union diplomats say they have spared Gazprombank from sanctions because payments on gas imports must continue. Last year, the European Union imported 45% of its natural gas from Russia, which equates to about $70 billion last year, according to Simone Tagliapietra, senior researcher at the Bruegel think tank. EU officials said on Tuesday they aim to cut that dependency by two-thirds this year, but that it will take much longer to end it completely.
Gazprombank also avoided banning Swift, the financial messaging infrastructure that connects banks around the world, which is cut for seven other Russian banks. European and American leaders have also said they are ready to sanction more banks, without specifying which ones.
Gazprombank has already picked up the pieces of the Russian banking system. When the Russian economy collapsed in 1998, leading to widespread bank failures, Gazprombank took over most gas export contracts with foreign countries, according to its 1998 annual report. This has made it a key dealer in foreign currencies and a nexus to the global financial system.
Gazprombank maintains correspondent banking relationships with several Western banks, allowing it to move US dollars, euros and other currencies on behalf of Russian clients. Foreign banks maintain accounts at banks in the United States and elsewhere to access these financial systems.
Listed correspondent banks include JPMorgan Chase & Co.
Deutsche Bank AG,
Bank of New York Mellon Corp.
and Commerzbank HER
. The branches of Gazprombank in Switzerland and Luxembourg also have their own correspondent banks. All three are also used for transactions.
Deutsche Bank, JPMorgan and Commerzbank declined to comment on Gazprombank. Deutsche Bank said that in general it can decide not to execute a payment, even from an unsanctioned bank, if it deems it too risky. Bank of New York did not respond to requests for comment.
Sparing Gazprombank from sanctions could open the door for the lender to become a conduit for businesses to and from Russia, a way to circumvent sanctions imposed on its peers, according to sanctions consultants. Sanctioned VEB held an 8% stake in Gazprombank in September, according to Gazprombank’s latest earnings report.
“The purpose of leaving some banks open now is to allow gas payments to flow. But it also means channels are open for other payments that may not be the ones intended,” said Cari Stinebower, a partner at Winston & Strawn law firm in Washington, D.C. and former head of the Office of Asset Control. foreigners from the Treasury, which applies the sanctions.
“If you look at Iran and Venezuela, the banks are masters at creating shell companies and layering transactions, so it’s almost impossible to tell who the ultimate recipients of transfers are,” added Ms Stinebower.
While Gazprom is still its biggest customer, the bank has grown over the years and now has operations touching much of Russia’s economy and connecting it to the West.
In Europe, Gazprombank has offices in Luxembourg, Switzerland and Cyprus where it provides financial services that can connect Russian customers to the mainland. Outside Luxembourg, it offers financing for private jets and yachts, according to its website. In Russia, it is one of the largest retail banks in the country, with over 3 million customers.
The bank is also part of the larger Gazprombank group which owns assets such as Škoda JS, which produces equipment for nuclear power plants in the Czech Republic, and a Russian media empire which owns major television channels, distributes films and publishes celebrity magazines.
Several people who have done business with Gazprombank have been hit with sanctions because of their ties to the Russian government or to Mr. Putin. Its chief executive, Andrey Akimov, and its chairman, Gazprom CEO Alexei Miller, were both designated Russian government officials by the US Treasury in 2018 when their US assets were frozen. Last month, the United States sanctioned another Gazprombank board member, Sergei Sergeevich Ivanov, chief executive of the country’s state-owned diamond mining company and son of one of Mr. Putin, according to the US Treasury.
Spokespersons for Gazprom, Gazprombank and the diamond company did not respond to requests for comment from the three executives.
One tycoon who was both a client and former employee of Gazprombank is Kirill Shamalov, Mr Putin’s former son-in-law, according to the US and UK governments. The Kremlin – which is tight-lipped about Mr Putin’s personal life – has long refused to confirm that the president’s daughter is married to Mr Shamalov. A former Gazprombank lawyer, Mr. Shamalov is the son of a businessman who is said to be a longtime friend of Mr. Putin.
In 2014, Gazprombank financed Mr. Shamalov’s purchase of a 17% stake in Sibur, a major Russian petrochemical company. The deal made Mr Shamalov, who was 32 at the time, Russia’s youngest billionaire, according to Forbes. He then sold most of his stake and Forbes estimated his net worth last year at $800 million.
The UK imposed sanctions on Mr Shamalov after Russia invaded Ukraine, and the US sanctioned him in 2018. Reached by phone, a spokeswoman for his company, Ladoga Management , requested that questions be submitted in writing and did not respond to an email.
Gazprombank is not completely unauthorized. The United States imposed limited restrictions on it in 2014 after Moscow took control of Crimea, preventing American lenders from extending medium- or long-term financing to the bank. When the invasion began last month, the United States reduced the allowed funding window to a maximum of 14 days. While the move may complicate Gazprombank’s operations, it does not have the effects of full-fledged sanctions imposed on other banks that essentially cut them off from the US market.
In Switzerland, the financial regulator in 2018 banned the local branch of Gazprombank from taking on new wealthy clients. He found that the unit had not carried out adequate checks on customers and transactions. It came after civil enforcement proceedings triggered by the Panama Papers data leak in 2016, which included information about a Gazprombank Switzerland account held by a close associate of Mr Putin.
Finma, the Swiss regulator, said the bank had seriously breached its anti-money laundering due diligence obligations for 10 years until 2016. This included a period when the bank was owned by another lender Russian.
Gazprombank said at the time that it accepted Finma’s decision, adding that its core business in Switzerland was corporate banking and carried out limited business with individuals. He said he had strengthened compliance. Finma’s ban expired and it started taking on new clients again in 2021.
In February, Gazprombank’s Swiss unit said the public prosecutor in Zurich had opened a criminal investigation into some anonymous employees. A spokesperson for the prosecutor’s office confirmed that it had filed charges against some employees, including the unit’s general manager, Roman Abdulin.
Mr. Abdulin did not respond to requests for comment. Gazprombank said in February that the employees under investigation had the full confidence of management and the board.
—Margot Patrick and Laurence Norman contributed to this article.
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