US consolidates Russian sanctions for 2016

US consolidates Russian sanctions for 2016
By bne IntelliNews December 23, 2015

In a move signalling Washington's continued support for Ukraine, the US Department of Treasury issued an update to sanctions against Russia on December 22, naming 34 new individuals and entities affected under Ukraine-related economic measures.

The punitory package was expanded in order to "maintain the efficacy of existing sanctions", to "counter attempts to circumvent these sanctions" and "to provide additional information to assist the private sector with sanctions compliance".

The announcement came a day after the European Council approved a six-month extension of the EU's own sanctions against Russia and "underscores US commitment to work with the EU" until Russia fully complies with its obligations with respect to Ukraine, a statement said, referring to the Minsk II peace accords aimed at halting the conflict in East Ukraine.

The expanded sanctions list now includes 14 more individuals and entities allegedly engaged in sanction evasion, and 12 entities operating in Crimea. It also identifies a number of subsidiaries owned 50% or more by Russia's previously-sanctioned VTB Bank, Sberbank, and Rostec state technology corporation.

In knock on-effects, the Belarusian operations of two major lenders, VTB Bank and Sberbank, are also under sanctions according to the updated sanctions list.

The sanctions evasion clause specifically targets organisations and individuals affiliated with alleged allies of Russian President Vladimir Putin, including businessmen Gennady Timchenko, Arkady Rotenberg, Boris Rotenberg, as well the Kalashnikov Concern, and Izhevsky Mekhanichesky Zavod JSC (also known as Baikal). Putin himself is not directly included in either the US or EU measures.

Similar to the previous sanctions update of July 30, the Treasury update is seen more as "fine tuning" of the existing measures in place, rather than a serious deepening of scope and effect.

However, the update downplays recent hopes that joint anti-terrorism efforts between Russia and the West and Russia's involvement in Syria will temporarily or permanently ease or remove the sanctions.

The Concorde Capital brokerage in Kyiv believes that with the updated sanctions the US has confirmed that Ukraine remains a foreign policy priority, despite the chnages in the geopolitical landscape because of Syria and despite frictions in Europe over Ukraine.

"We are confident that these sanctions are effective in influencing opinions and actions in Moscow," Concorde's chief analyst Zenon Zawada wote in a research note.

Timothy Ash, a credit strategist with Nomura International, agrees that the consolidation of the US sanctions sends a firm signal east. "The message from the US administration is fairly clear to Moscow, i.e we can cooperate over Syria and against the global terrorist threat where it is in our interests, but we are clearly separating this from the crisis in Ukraine, where we need to see much more cooperation in terms of implementation of Minsk II, and we still want you out of Crimea," Ash wrote in an email.

The "fine tuning" of the sanctions may also reflect US displeasure with Moscow's recent efforts to derail the implementation of the trade agreement between Ukraine and the EU, from January 1, 2016, and the deepening of the trade war between Russia and Ukraine. On December 21, Moscow confirmed economic "counter-measures" against Ukraine starting from January 1, due to Kyiv's joining anti-Russia sanctions imposed by the EU and US.