Banks Jittery Over Ties With Russia Following Sanctions Similar To Iran
Fear of uncertainty and possible legal entanglements have made global banks jittery about dealing with Russia, similar to Iran's experience with sanctions.
Fear of uncertainty and possible legal entanglements have made global banks jittery about dealing with Russia, similar to Iran's experience with sanctions.
Faced with an unprecedented level of sanctions on Russia, banks are taking a dim view of business with all Russian entities and dropping clients if there is even a slight doubt on their ties to that country, Reuters quoted bankers and lawyers as saying.
While European and North American governments have introduced serious banking and other business sanctions, countries in Asia and Elsewhere are introducing their own restrictions.
Sanctions experienced by Iran went a bit farther than those announced against Russia, such as cutting off all banks, instead of a select group, and the central bank from the global SWIFT. But the overall psychological and legal impact appear not be too different.
While global banks have extensive experience with sanctions and have invested billions of dollars in compliance programs in recent years, the curbs on Russia are unmatched in their scale, speed and complexity and may yet grow, said executives. Russia was a much larger financial player before the sanctions than Iran ever was.
To avoid falling foul of the rules and having assets and capital ensnared by new curbs, banks are adopting extreme caution in all of their dealings with Russian entities, actions that will likely exacerbate global trade disruptions, said bankers and lawyers.
The United States alone fined banks billions of dollars for breaching its OFAC (Office of Foreign Asset Control) restrictions since 2010. BNP alone was fined $8.9 billion in 2014, while Commerzbank and HSBC were also fined in billion-dollar figures. From 2010-2019, the US took action against 32 banks and all paid penalties.
Many of these cases were related to Iranian sanctions violations, which has made international banks extremely careful in their dealings.
A senior Hong Kong-based Asia trade finance banker with a global lender told Reuters that his compliance colleagues are asking more questions even if a financing deal involves a non-sanctioned Russian entity, directly or indirectly.
The issue is not just current sanctions, but what may still come. "It's not just managing risk from the existing sanctions, but also thinking about what more could possibly happen on that front," an Asian banker told Reuters. "No one would like to sign a billion-dollar trade finance deal only to be told a week later that the entity in Russia has also been added to the sanction list."
There is also the danger of aftereffects even when sanctions are removed. Iran experienced this syndrome when it resolved its nuclear issue with world powers in 2015 and international sanctions were lifted.
From 2016-2018 when most economic sanctions were removed, Iran had a hard time to get major deals and joint ventures. While the country needed tens of billions of dollars in investment, it was able to secure just a few billion dollars.
The fear that a regime is unpredictable and sanctions can be reimposed for new unacceptable actions, will keep the financial sector and corporations away from a country which has emerged from sanctions.
Charlie Steele, partner at Washington-based consultancy Forensic Risk Alliance and a former US Treasury Department sanctions attorney told Reuters, "Banks generally, and certainly the global banks, often tend to be very cautious and conservative with respect to sanctions, especially U.S. sanctions.”
With reporting by Reuters
In a televised speech Tuesday, Iran's Supreme Leader detected a ‘colored coup’ in Ukraine, referring to past United States-backed ‘colored revolutions’ in eastern Europe.
Ali Khamenei said Iran was “in favor of stopping the war,” which he blamed on the United States and Nato, following President Ebrahim Raisi earlier explaining the Ukraine crisis in terms of Nato’s eastern expansion, which has taken in 13 countries since 1999.
Iran’s state media and hardliner outlets have avoided using the word ‘invasion,’ while conservative and reformist media have in some instances criticized Russia for the invasion or expressed more nuanced views.
Kayhan newspaper, the hardliner flagship, has blamed Nato and the US. A note published Wednesday contrasted Iranians who defended their country against the 1980 Iraqi invasion, while Ukrainians did not even "pretend to resist as much as a scarecrow" and fled across the borders.
Kayhan’s statement was labeled as an insult to the Ukrainian people on social media, while the comment obviously contrasts with international admiration for Ukrainian people’s resistance.
The conservative Alef has both censured Russia over the invasion and argued out Nato had set Ukraine up as a victim. Like most other countries in the Middle East, Alef said, Iran should remain neutral and try to contribute to a diplomatic solution.
Double standards
Jafar Mohammadi, editor of the conservative Asr-e Iran website, was also nuanced. "Russia's attack on Ukraine is a clear breach of international regulations and a crime against humanity," he wrote Tuesday, while criticizing Nato for failing to stop Russia. Mohammadi also highlighted double standards over Ukrainian refugees compared to Syrians and Afghans, as well as over Israeli occupations and Saudi Arabia bombing cities in Yemen.
"That they have driven the invading Russia to a corner of isolation and sanctions is a very good measure,” Mohammadi wrote. “That's what an aggressor deserves, but they must show the same response to other aggressions, which they don't, and the outcome is an unsafe world in which even the value of children's blood is measured by the color of their eyes.”
Russia appears to see Iran as an ally in the war against Ukraine. The Russian embassy in Tehran Wednesday published on Twitterand Instagram photos from Iran including an Iranian flag with ‘We Support Russia’ in Persian. It claimed these were from a "flash mob of Iranians in support of the Russian army with the sign 'Z'". A few photos published in the tweet do not show a ‘flash mob.”
Blind enmity
In February, some Iranians expressed anger on social media when the Russian embassy honored Alexander Griboyedov – ambassador, promising writer and friend of Aleksandr Pushkin – who along with all the Russian embassy staff was murdered by a Tehran mob in 1829.
Hundreds of Iranians on social media have been expressing anger at the invasion in the past six days and criticizing the government’s position. Some are attacking Supreme Leader Ali Khamenei, calling him a lackey of Russia.
Reformist commentator Sadegh Zibakalam suggested phobia towards the West and "blind ideological enmity" had prevented Iranian officials from having a realistic understanding of developments such as the Ukraine crisis.
For Zibakalam, this explained notions that Ukraine had been “deceived by the West” or that “Western [powers] are responsible for the war because they wanted to expand Nato towards Russia." Zibakalam took it upon himself Tuesday to apologize to Ukrainians for the Iranian government's stance.