US Expands Sanctions on Russian Financial Entities Amidst Global Reactions

The United States has imposed new sanctions against Russia’s Gazprombank and several other financial institutions, marking an intensification of economic penalties in response to Russia’s ongoing aggression in Ukraine. The U.S. Department of the Treasury announced these measures, which target Gazprombank, a major financial player linked to the state-owned gas giant Gazprom, along with fifty smaller banks and forty securities registrars in Russia.

The Treasury’s Office of Foreign Assets Control (OFAC) also issued a caution regarding sanctions risks for financial institutions that participate in Russia’s domestic financial messaging system. This system was established by Moscow following its exclusion from the Society for Worldwide Interbank Financial Communication (SWIFT), a leading global platform for electronic transactions.

Dr. Vladislav Inozemtsev, senior fellow at the Center for Analysis and Strategies in Nicosia, Cyprus, remarked, “This is a long-awaited measure that may dramatically change the Russian financial architecture.» He added that the impact of these sanctions is on par with that of the European oil embargo enforced in January 2023.

Despite these actions, critics argue that the timing is problematic, as the steps are being taken in President Joe Biden’s final months in office. They assert that similar measures should have been enacted at the start of the large-scale Russian invasion of Ukraine in February 2022.

Analysts point out that the initial sanctions in 2022 did not significantly hinder Russia’s war efforts or weaken President Vladimir Putin’s regime, which maintained its hold on power partly through economic support from countries like China and India.

Japan has been cautious about the potential impact of these new sanctions on its energy security. Following the U.S. announcement, Japan’s Minister of Economy, Trade and Industry, Yoji Muto, stated that Japan will continue to work with the United States and other G7 countries to ensure stable energy supplies, particularly regarding liquefied natural gas from Russia’s Sakhalin-2 project. Notably, transactions related to this project are exempt from the sanctions until June 28, 2025.

Masataka Fujiwara, president of Osaka Gas, one of the companies involved in purchasing gas from Sakhalin-2 under a long-term contract, indicated that the U.S. sanctions would not disrupt their settlement processes, as Osaka Gas does not rely on Gazprombank for financial transactions.