Elektrobudowa, a Polish firm that builds power plants, is interested
in buying its partner out of a Russian company they jointly own, but
there is a problem: the partner firm is owned by a pro-Moscow Crimean
politician on the EU’s sanctions list.
To buy out the partner would mean Elektrobudowa transferring cash or assets to the owners, and that, say lawyers who specialise in sanctions law, could be interpreted as a violation of the EU measures.
Many Western investors and their banks are facing similar quandaries after the imposition of targeted sanctions by the EU, the United States and a handful of other jurisdictions.
Those measures are supposed to punish Russia’s elite for annexing Crimea, but according to people advising companies in this field they have also spread confusion and created awkward predicaments for some foreign investors.
Finnish retailer Stockmann said this week it was freezing plans to open more department stores in Russian cities because of uncertainty and a falling rouble, and other investors may follow suit, either halting or cancelling projects.
A surge in net capital flight – mostly Russians sending their own funds abroad to avoid uncertainty at home – is one of the main factors prompting Russia’s central bank to warn that economic growth would likely fall below 1 percent this year.
Western banks involved in global commodity trade flows are also tightening payment procedures for deals with Russia, having already taken similar steps with Ukraine. Some banks now require, for example, that payment for exports of steel or grain be made only once there is proof cargoes have been loaded onto a vessel, as opposed to allowing the transfer of funds for material still in Russia or Ukraine.
“I have experienced huge concern in all the European companies I have been in contact with – both economic concern and about what happens next, regarding sanctions and retaliation,” said Lars Christensen, chief analyst at Danske Bank. “The customers are very, very scared. In fact, in 15 years I have never seen the customers this scared about political matters.”
Banks, stung in the past for failing to implement sanctions correctly, are particularly wary of falling foul of the rules and are being ultra-cautious about applying them.
U.S. bank JP Morganagreed to process a payment from Russia’s embassy in Kazakhstan to an insurance agency after initially refusing on the grounds that the agency was partly owned by a unit of Bank Rossiya, blacklisted by the White House.
JP Morgan’s initial ban caused uproar in Moscow. After consulting with U.S. regulators, the bank relented.
Meanwhile, Visa and MasterCard have resumed payment services for clients of another Russian bank, SMP, which they halted last month because its main shareholders were on the U.S. blacklist, although unlike Rossiya the bank itself was not. Visa said it was told by Washington to lift the restrictions.
Read more: Business Newswires : euronews : the latest international news as video on demand
To buy out the partner would mean Elektrobudowa transferring cash or assets to the owners, and that, say lawyers who specialise in sanctions law, could be interpreted as a violation of the EU measures.
Many Western investors and their banks are facing similar quandaries after the imposition of targeted sanctions by the EU, the United States and a handful of other jurisdictions.
Those measures are supposed to punish Russia’s elite for annexing Crimea, but according to people advising companies in this field they have also spread confusion and created awkward predicaments for some foreign investors.
Finnish retailer Stockmann said this week it was freezing plans to open more department stores in Russian cities because of uncertainty and a falling rouble, and other investors may follow suit, either halting or cancelling projects.
A surge in net capital flight – mostly Russians sending their own funds abroad to avoid uncertainty at home – is one of the main factors prompting Russia’s central bank to warn that economic growth would likely fall below 1 percent this year.
Western banks involved in global commodity trade flows are also tightening payment procedures for deals with Russia, having already taken similar steps with Ukraine. Some banks now require, for example, that payment for exports of steel or grain be made only once there is proof cargoes have been loaded onto a vessel, as opposed to allowing the transfer of funds for material still in Russia or Ukraine.
“I have experienced huge concern in all the European companies I have been in contact with – both economic concern and about what happens next, regarding sanctions and retaliation,” said Lars Christensen, chief analyst at Danske Bank. “The customers are very, very scared. In fact, in 15 years I have never seen the customers this scared about political matters.”
Banks, stung in the past for failing to implement sanctions correctly, are particularly wary of falling foul of the rules and are being ultra-cautious about applying them.
U.S. bank JP Morganagreed to process a payment from Russia’s embassy in Kazakhstan to an insurance agency after initially refusing on the grounds that the agency was partly owned by a unit of Bank Rossiya, blacklisted by the White House.
JP Morgan’s initial ban caused uproar in Moscow. After consulting with U.S. regulators, the bank relented.
Meanwhile, Visa and MasterCard have resumed payment services for clients of another Russian bank, SMP, which they halted last month because its main shareholders were on the U.S. blacklist, although unlike Rossiya the bank itself was not. Visa said it was told by Washington to lift the restrictions.
Read more: Business Newswires : euronews : the latest international news as video on demand
