EU sanctions freeze out Russia’s biggest banks as growth forecasts slashed
New European Union sanctions against five of the largest Russian banks will hit the City hardest, according to analysts, while major restrictions on arms sales will not apply to France’s warship sales to Moscow.
Sberbank, the largest bank in Russia, was named by Brussels in the tranche of sanctions yesterday. The institution raised $5.2bn (£3.08bn) on the London stock exchange in 2012, a move which would now be illegal under the EU’s new rules.
VTB Bank, Vnesheconombank, Rosselkhozbank and Gazprombank, some of the country’s biggest, were also named.
The restrictions placed on the banks are the strictest yet to come from the EU, and aim to lock the institutions out of the bloc’s capital markets – of which London has the largest and most developed.
“Looks like in terms of burden sharing most will fall on the UK and London – the financial sanctions look like they’re the most developed,” said Open Europe’s head of economic research, Raoul Ruparel, who added that the sanctions would be manageable for the City.
The sanctions say that sales of dual-use goods and technology – which could be used for military use in Russia – are now prohibited. However, the statement adds that this will apply only to contracts made from today, excluding France’s sale of two Mistral warships that it is selling to the Russian government.
“The arms embargo doesn’t mean much without having Mistral on the table – our arms trade with Russia is not enormous,” added Ruparel.
VTB Bank, which has advised Russian firms on their London flotations in the past, lashed out at the decision, saying that it would “contradict Europe’s democratic values”, adding that they were “incompatible with the core principle and values of the free market”.
In a statement it said: “Despite the sanctions that have been imposed, VTB Bank and all its subsidiaries [including the group’s investment bank unit VTB Capital] continue to operate as usual, honouring all obligations to investors and shareholders, while upholding our commitment to providing high quality service to our clients.” It added that VTBC will not be impacted by the sanctions as it does not raise capital directly.
BNP Paribas slashed Russian growth forecasts after EU and US sanctions this week, expecting a two-year recession, with a two per cent drop in GDP this year and a three per cent decline in 2015.