Tenth EU sanction package hits Alfa, Rosbank and Tinkoff

Tenth EU sanction package hits Alfa, Rosbank and Tinkoff
Sanctions on Tinkoff and Rosbank will deliver a blow to Russian oligarch Vladimir Potanin, a major shareholder in both banks. / bne IntelliNews
By bne IntelliNews February 27, 2023

Following the US and the UK, the European Council has adopted the 10th package of sanctions against Russia on the anniversary of full-scale military invasion of Ukraine, including further export bans worth more than €11bn, curbs on critical tech and industrial goods, and more sanctioned banks.

As followed by bne IntelliNews, the EU failed to agree on the tenth sanction package over a ban on imports of Russian synthetic rubber (adopted in the end) and sanctions on Rosatom nuclear agency and contractor (not adopted). There has also been pressure to include Russia’s diamond mining monopolist Alrosa into the sanctions, but that effort has also been unsuccessful thanks to lobbying by Antwerp in Belgium, a major diamond trading hub.

In line with previous reports, the latest EU sanctions also include the private Alfa-Bank, Rosbank and Tinkoff Bank, which will be subject to full blocking sanctions and will be disconnected from SWIFT.

Alfa Bank is part of the Alfa Group of Russian billionaire Mikhail Friedman. Tinkoff, part of the TCS banking group, Russia’s only pure online bank, and has remained the only unsanctioned major retail lender until now. Until the war, Tinkoff was an investors’ darling and saw its stock price soar 20-fold. Russia’s eleventh-largest bank Rosbank used to be a wholly-owned Russian subsidiary of French Société Générale.

Sanctions on Tinkoff and Rosbank will deliver a blow to Russian oligarch Vladimir Potanin, a major shareholder in both banks. Potanin remained free of Western sanctions for four months following Russia's invasion and quickly used the cash available to buy cheap discounted assets at home, and to rebuild his banking business empire. He sold Rosbank to Société Générale in the boom years in the noughties, but bought it back last year at knock-down prices. Potanin also picked up a 35% stake in banking TCS Group (Tinkoff) from the family trust of its founder, Oleg Tinkov, after the latter published a sharp foul-mouthed critique of the "insane war" in Ukraine. According to press reports Potanin paid kopecks on the ruble for the stake in what was seen as a politically inspired fire sale.

Notably, the EU also sanctioned the National Wealth Fund (NWF), which is used to finance large state-supported infrastructure projects, and the Russian National Reinsurance Company, which could further complicate the insurance of the oil-transporting tanker fleet. Last year, the CBR recapitalised RNRC to make it big enough to provide maritime insurance services as part of the Kremlin’s efforts to dodge the oil price cap scheme and provide insurance to its growing “ghost fleet” of oil tankers.

The EU introduced additional export bans on heavy trucks not yet banned (and their spare parts), semi-trailers, and special vehicles such as snowmobiles, electric generators, construction goods such as bridges, complete industrial plants (added to avoid loopholes) and additional goods used in the aviation industry (turbojets).

These new bans and restrictions cover EU exports worth €11.4bn, the sanction announcement claims, coming on top of the €32.5bn worth of exports already sanctioned in the previous packages.

The additional import bans from Russia to the EU include synthetic rubber and carbon black, bitumen and related materials like asphalt, which is estimated to be worth €1.3bn, on top of €90bn already sanctioned, representing altogether 58% of the EU's 2021 imports.

The EU added 96 additional entities to the list of 506 companies associated with Russia's military-industrial complex, and introduced new curbs on supplies of sensitive dual-use and advanced technologies that contribute to Russia's military capabilities and technological enhancement.

The EU also introduced new reporting obligations on the frozen reserves and assets of the Central Bank of Russia.

As covered by bne IntelliNews, the previous ninth sanction package was also bogged down in debate over bans on food and fertiliser exports from Russia, and finally adopted in a watered-down version in December 2022.

In October 2022 the EU approved the eighth sanction package, which included a ban on shipments of Russian oil above a price cap, various import bans worth an estimated €7bn, and a ban on servicing crypto assets of Russian nationals and residents.

The July 2022 seventh package of sanctions for Russia’s military invasion of Ukraine comprised a boycott of Russian largest lender Sber (Sberbank), a gold embargo and sanctions against another 57 individuals and legal entities.

In June 2022 the EU’s sixth sanction package included cutting 90% of Russian oil imports by the end of 2022, banning more Russian banks from SWIFT, and sanctioning the National Settlement Depository, among other measures.

The fifth sanction package enacted in April 2022 included an embargo on €4bn worth of Russian coal imports, an asset freeze of “several” Russian banks, a ban on Russian trucks and ships in European ports, a ban on high-tech goods exports to Russia of up to €10bn, and additional import limitations for up to €5.5bn of Russian goods.

The fourth sanctions package of EU sanctions enacted on March 15 included an import ban on steel products; a ban on new investment into the Russian energy sector; a ban on transactions with certain Russian state-owned enterprises (SOEs); and an export ban on luxury goods, amongst other things. The list of sanctioned oligarchs was also extended.

Prior to that the EU also added 14 more Russian top executives and billionaires to the sanctions list in addition to initial sanctions against six Russian oligarchs.