The US, EU, UK, Canada and Australia launched a fresh barrage of sanctions for Russia’s full-scale military invasion of Ukraine on July 20, with the US targeting among others the veteran policymaker Alexei Kudrin entrusted by the Kremlin with restructuring internet major Yandex, as well as the country’s only purely online bank Tinkoff.

The latest highly co-ordinated sanctions effort against Russia also targets cross-border money transfers, electronics and hightech, oilfield services and engineering, and shipping services.

Co-ordinated sanction strike 

The analysts and lawyers surveyed by Kommersant daily note that the mass announcement of the sanctions on July 20 came as a “co-ordinated strike” that showed a "common consensus" on anti-Russian sanctions policy. In addition, the UK has a simplified sanctions procedure where a person could be designated on the basis of being included in other sanction lists, including the Canadian list. 

When similar restrictions are introduced in several jurisdictions at once, their scope expands considerably, and this simplifies the situation for law enforcement authorities, as they co-operate with each other, lawyers told Kommersant. 

Kudrin and Yandex – privatisation or nationalisation?

The US Department of Treasury provided no commentary on the inclusion of Alexei Kudrin on the SDN list apart from him having "close ties to Vladimir Putin" and "participating in the technology sector of the Russian economy". 

Sanctions on Kudrin could be a significant development for the restructuring of Russia’s internet major and most valuable internet company Yandex. As followed by bne IntelliNews, Yandex is undergoing a split between its foreign and domestic assets to minimise sanction risks following Russia's full-scale military invasion of Ukraine. 

About a dozen bidders from among Russia's richest oligarchs have already submitted bids for the company, and latest reports suggest that VTB will participate in the deal along with a trio of Russia's richest oligarchs.

The deal discussed between the company and the government is mediated by now-sanctioned ex-Finance Minister and veteran policymaker Kudrin, who is also expected to receive a minority stake and a top-level position in the new restructured domestic Yandex entity. 

Should the sanctions on the ex-FinMin complicate Yandex privatisation, it could actually be a present to Russian hardliners who are calling for nationalisation of Western assets in Russia. As followed by bne IntelliNews, Russian assets of Danone and Carlsberg have been unabashedly handed to Vladimir Putin’s cronies, possibly launching a new redistribution of wealth to Kremlin’s closest allies.

Previously the head of country's second-largest state bank VTB Andrei Kostin already called for abandoning the market principles and valuations of the Yandex deal, and using the “external management” model or de-facto nationalisation of foreign assets.

 

Tinkoff Bank on SDN list, as founder Tinkov cleared

As followed by bne IntelliNews, on the same day as Tinkoff Bank has been put on the US SDN List, the founder and former owner of Tinkoff Oleg Tinkov has been cleared of sanctions by the UK. Tinkoff Bank of TCS Group is controlled by Interros of sanctioned Vladimir Potanin, who bought the bank from Tinkov when he was picking up exiting Western assets and rebuilding his banking empire.

The new restrictions mean blocking US dollar assets and transfers, with mirror sanctions also introduced by Canada on the same day. The restrictions affect the Tinkoff Bank, but not its parent structure TCS Group, and the trading of TCS Group shares on Moscow Exchange continues as usual, RBC business portal reported.

"We have been preparing for this turn of events and will do everything possible to make this news as unnoticeable as possible for our clients. We are currently analysing the impact of the sanctions. Tinkoff products, services and applications work as usual," the bank commented as cited by RBC.

In 2022 Tinkoff remained profitable, maintaining a RUB21bn profit under IFRS, albeit down 3-fold year on year. In 1Q23 alone, TCS Group posted RUB16.2bn profit. Tinkoff, an online bank, serves over 28mn retail customers.

The analysts surveyed by RBC believe that Tikoff is well-prepared for disruptions of operations with foreign correspondent banks. In 2022, Tinkoff significantly cleared its balance sheet of assets in US dollars and euros.

According to RBC, US dollar assets decreased by 40%, to RUB125bn in 2022, while liabilities were down by 43% to RUB130bn. The volume of US dollar derivatives on the balance sheet last year fell 4.6 times, to RUB6.4bn. 

Cross-border money transfers targeted

In addition to Tinkoff, the US included in the SDN list the Loko Bank, Solidarnost Bank, St Petersburg Social Commercial Bank (PSKB), as well as Unistream Bank – the operator of the payment system of the same name.

Notably, Unistream is one of the three largest cross-border transfer systems used by expatriated Russians along with Zolotoy Korona and Contact. 

The sanctions on Unistream and Tinkoff could thus significantly reduce the options for cross-border transfers for Russians. Tinkoff Bank and Solidarnost are issuers of cards under the Chinese payment system UnionPay. In February 2023, five banks issuing these cards had already been hit by the SDN, and such cards stopped working abroad, RBC business portal reminds.

In Russia, all card transactions go through the National Payment Card System, so the restrictions do not affect their ability to work inside the country.

Tinkoff has already warned customers about these consequences. The UnionPay card will "really stop working" abroad as of July 21 and the bank will stop issuing it shortly, an unnamed employee of the bank told RBC.

Two major Georgian banks have already reacted to the sanctioning of Unistream: the company has disappeared from the list of payment systems for crediting transfers in the bank's TBC application, and the support of Bank of Georgia informed clients about the impossibility of crediting transfers using Unistream, one of the clients told RBC.

Canada has backed up the sanctions on money-transferring infrastructure by designating the Russian payment system MIR and Yadex.Pay payment service of internet major Yandex.

Technology and electronics

New companies associated with the development and import of electronics, components and equipment were also put on the US SDN list. This includes nuclear energy agency and contractor’s Rosatom's structure NPO Critical Information Systems (NPO KIS). It was established in September 2022 to develop and produce trusted software and hardware complexes for critical information infrastructure.

Market sources told Kommersant daily that KIS is consolidating buying electronics developers and manufacturers, including Kraftway and ICST.

The SDN-list also includes a number of companies that import radio-electronic components or provide contract manufacturing services. These are Basis Trade Prosoft (industrial computers, lighting equipment and components), Komponenta (radio electronic components, PCB assembly), AK Microtech (equipment for microelectronics production), Forpost Trading (contract assembly, supply of components), Fortap (imported hard discs, processors, motherboards and RAM), RadioTechSnab and Radiant EK (radio electronic components).

A Kommersant source close to one of the radio electronics manufacturers says that the 2022-2023 sanctions have forced market players to "move into the parallel import zone." "But the sanctions will not stop their work: for every sub-sanctioned firm, they will open 25 new ones and continue. I don't see any big problems in this," the sources claim.

The EU has also supported the sanctions on the technology sector by sanctioning the Department of Information Technology (DIT) of Moscow and two of its contractors, NtechLab and Tevian, engaged in the development of facial recognition systems, as involved in human rights violations. The measures against DIT are attributed to its transmission of facial recognition data to the main department of the Ministry of Internal Affairs in Moscow (also sanctioned). 

Canada, in turn, sanctioned electronics manufacturer CMT-AiLogic and component supplier Device Consulting. 

Oilfield services, oil and gas engineering

The US also continued to impose sanctions against Russian oilfield services and oil and gas engineering. The SDN list included, in particular, one of the market leaders: drilling company Eurasia (the largest owner is Vagit Alekperov's family), as well as Siberian Service Company, associated with the beneficiaries of Soyuzneftegaz, former Minister of Fuel and Energy Yuri Shafranik and Ilya Shebunin.

Market sources told Kommersant that already in 2022 both Eurasia and SSC had experienced significant difficulties in replacing components due to sanctions, as well as problems with logistics. Inclusion on the SDN list may make it more difficult to obtain drilling equipment through friendly countries due to billing problems.

The US also added to the SDN-list Gazprom Avtomatizatsiya of Russian natural gas giant Gazprom, the largest player in the oil and gas construction market in NIPI Gaz Pererabotka (abbreviated as NIPIGAZ, owned by current and former management of SIBUR petrochemical major). 

NIPIGAZ manages the construction of Gazprom's Amur GPP and SIBUR's Zapsib Neftekhim complex. The company also replaced the engineering companies responsible for the construction of NOVATEK's Arctic LNG-2, which left Russia due to sanctions. 

Far Eastern shipping and Rosatom

One of the largest cargo carriers in the Far East, Sakhalin Shipping Company (SASCO), and its subsidiaries MPL Vanino Sakhalin, Vostok Trade Invest and its entire fleet of 14 sea-going vessels have also been included in the SDN-list. 

In August 2022, Delo Group bought a controlling stake in Sakhalin Shipping Company. The group itself is 49% owned by Atomenergoprom, which is part of Rosatom, and 51% by Sergei Shishkarev, the holding's founder.

The SDN-list included a branch of Atomenergomash's (AEM) AEM Propulsion, which produces propulsion equipment for ships. In particular, it manufactures the propulsion system, including the propeller shaft with propeller, for the lead icebreaker Rossiya of the Leader project, which is being built at the Zvezda shipyard (managed by a consortium of Rosneft, Rosneftegaz and Gazprombank).

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