U.S. allowed JPMorgan payment route for Russian agricultural exports

[April 26, 2023]  MOSCOW (Reuters) -The United States gave JPMorgan Chase & Co permission to process payments for the Russian Agricultural Bank, but the temporary arrangement was no substitute for reconnecting the bank to the SWIFT payment system, a Russian source told Reuters.

Access to SWIFT is one of Russia's main demands in negotiations over the future of the Black Sea grain export deal, which the United Nations says helps to tackle a global food crisis that has been aggravated by the Ukraine war.

The Kremlin has repeatedly warned that the deal is crumbling and will not be renewed beyond May 18 unless the West removes obstacles to Russian grain and fertiliser exports, including the financing and insurance of exports.

The Russian source, who spoke on condition of anonymity, said the U.S. Office of Foreign Assets Control had allowed the transaction.

"The transactions are difficult," said the Russian source, who has knowledge of the situation.

The JPMorgan route was proposed as an alternative to reconnecting Russian Agricultural Bank (known as Rosselkhozbank) to SWIFT, but could be terminated at any time, the source said.

"This cannot replace SWIFT," the source said.

JPMorgan and Russian Agricultural Bank did not reply to requests for comment.

Russian Foreign Minister Sergei Lavrov on Tuesday told a briefing at the United Nations that one bank "kindly consented to finance one operation," but that this was not an acceptable long-term solution. Lavrov did not name the bank.

A different source familiar with the transaction said the U.S. State Department and U.S. Treasury had asked JPMorgan to carry out the "very limited and highly monitored" transaction in relation to the export of agricultural materials, which occurred this month.

The U.S. Treasury declined to comment.

LETTER TO PUTIN

Russia, usually the world's top wheat exporter, signed a deal last July in which the United Nations agreed to help to try and remove any obstacles to its grain and fertiliser exports.

A J.P. Morgan logo is seen outside the JPMorgan bank offices in Paris, France, January 27, 2023. REUTERS/Sarah Meyssonnier

Those exports are not subject to Western sanctions imposed following the February 2022 invasion of Ukraine, but Moscow says restrictions on payments, logistics and insurance are a barrier to shipments.

One of Russia's key demands is for the Russian Agricultural Bank to return to the SWIFT banking system.

Other demands include access to ports, the resumption of the Togliatti-Odesa ammonia pipeline, and the unblocking of assets and the accounts of Russian companies involved in food and fertiliser exports.

In a bid to save the Black Sea grain deal, U.N. Secretary-General Antonio Guterres gave Lavrov a letter addressed to President Vladimir Putin that outlines a way forward aimed at the improvement, extension and expansion of the Ukraine Black Sea grain deal, a U.N. spokesperson said.

The Kremlin said on Wednesday that the letter had been passed on via diplomatic channels and was being considered.

"It is being considered," Kremlin spokesman Dmitry Peskov said.

In Geneva, a Russian envoy said there had been no real progress on resolving the obstacles to Russian grain exports, warning that Rosselkhozbank had to be reconnected to SWIFT.

"What we need is not only case-by-case decisions, we need a systematic decision to reconnect Rosselkhozbank to SWIFT to make it possible for this bank to operate," Russia's envoy to the United Nations in Geneva, Gennady Gatilov, told reporters.

(Editing by Guy Faulconbridge, Editing by Louise Heavens, Barbara Lewis and Jane Merriman)

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