|
 Russia's Foreign Ministry said on Tuesday the "unacceptable,
illegal and absurd" act of blocking the payment would have
consequences for the U.S. Embassy in Russia.
The confrontation threatened to further strain ties between
Washington and Moscow, locked in the worst standoff since the Cold
War over Russia's annexation of Ukraine's Crimea region.
"Following consultation with our regulators, we are processing this
transaction," JPMorgan said in a statement.
Last month, Washington imposed sanctions, including visa bans and
asset freezes, against several Russians close to President Vladimir
Putin and against Rossiya Bank, which it said was the "personal
bank" for the leader's inner circle.
The destination for the embassy payment was insurance agency Sogaz,
which is 48.5 percent owned by Abros, a wholly-owned subsidiary of
Bank Rossiya.
Industry consultants in Moscow say financial institutions are
unclear about how to apply the new rules in some situations, such as
when dealing with subsidiaries of companies which have either been
sanctioned or which have shareholders that have been punished.
Several Western investors and their banks are facing quandaries over
individual situations.
Guidelines on the U.S. Treasury department's website from the U.S.
Office of Foreign Assets Control says that property which is more
than 50 percent owned by a person on the sanctions blacklist is
affected and advises acting "with caution" when ownership interests
are less than 50 percent.
"It is up to private companies and lawyers to figure out who is
subject to sanctions," said one Moscow-based lawyer. "Of course (a
U.S. bank) is more scared of the American (authorities than the
Russian ones)."
COSTLY
Falling foul of U.S. authorities can be extremely costly.
BNP Paribas, France's biggest listed bank, in February set aside
$1.1 billion for a possible fine for breaching U.S. sanctions on
countries including Iran.
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Sogaz said in a statement last month that Abros had decreased its
shareholding to 48.5 percent, but did not specify the shareholding
level prior to the decrease.
"Sogaz doesn't have any shareholders holding more than 50 percent of
the company shares directly or indirectly, so we see no reason for
Sogaz to be included in the U.S. sanctions," a Sogaz representative
said in emailed comment late on Wednesday.
The confusion around sanctions caused Visa and Mastercard to briefly
cut off services for clients at Russia's SMP bank, whose main
shareholders were affected by U.S. sanctions, before resuming them
shortly after.
Russia's accusation could damage relations the bank has with the
Russian authorities. JPMorgan generated $55.6 million in investment
banking fees in Russia last year, with a 7 percent market share,
according to Thomson Reuters data. Worldwide, JPMorgan recorded $6.4
billion in investment banking fees last year, according to the
company's annual report.
JPMorgan is the biggest U.S. bank by assets and for its size it does
relatively little lending in Russia. At year-end, its loans and
trading positions at risk to Russia totaled $5.4 billion compared
with the company's total assets of $2.4 trillion.
JPMorgan is one of a number of Western banks operating in Russia.
Others which have a presence here include Goldman Sachs, Bank of
America, Citigroup and Morgan Stanley.
(Additional reporting by Alexei Anishchuk;
editing by Maria Kiselyova, Elizabeth Piper and Angus MacSwan)
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