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U.S. widens sanctions on Russia's Gazprombank

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Gazprombank handles European payments of Russian gas

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Sanctions may shut this payment avenue, analysts say

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U.S. move could also push Moscow closer to Beijing

By Elena Fabrichnaya, Alexander Marrow and Vladimir

Soldatkin

MOSCOW, Nov 22 (Reuters) - New U.S. sanctions on Moscow

may shut down the only way European customers can pay for

Russian gas, increase volatility on Russia's FX market and push

Moscow closer to Beijing's orbit, Russian economists said on

Friday.

Washington imposed new sanctions on Russia's Gazprombank on

Thursday that prevent the state-controlled lender from handling

any new energy-related transactions that touch the U.S.

financial system. The U.S. also targeted around 50 other Russian

banks and the Bank of Russia's System for Transfer of Financial

Messages (SPFS).

Hungary and Slovakia, both of which have long-term contracts

with Russian energy giant Gazprom, are studying the

changes. Russian Deputy Energy Minister Pavel Sorokin declined

to comment when asked if Gazprombank would continue receiving

payments from European clients.

"EU payments for energy resources through Gazprombank will

likely become impossible at the end of 2024," Sinara Investment

Bank analysts said.

The sanctions included a wind-down period for transactions

involving Gazprombank until Dec. 20 and for those related to the

Sakhalin-2 oil and gas project in Russia's Far East until June

28, 2025.

The Kremlin said on Friday the sanctions were an attempt by

Washington to hinder Russian gas exports, but a solution would

be found. Gazprombank said the sanctions would not impact its

banking operations, but did not respond to questions on gas

payment solutions.

In March 2022, Moscow demanded that countries hostile to

Russia pay for gas supplies under a scheme that involves the

conversion of hard currency into roubles. Buyers could open two

accounts at Gazprombank, one in roubles and one in foreign

currency.

Now, they will need to find another intermediary.

The U.S. has authorised transactions related to energy with

certain exceptions for a dozen Russian financial institutions

until April 30, 2025. Some analysts say Gazprombank could be

added to that list.

GEOPOLITICAL TENSIONS

"The tightening of sanctions fits into the latest round of

escalating geopolitical tensions and, of course, looks like an

attempt by the outgoing administration to use its available

tools in the remaining time," Renaissance Capital economists

Oleg Kuzmin and Andrei Melashchenko said.

U.S. President-elect Donald Trump, who is deeply sceptical

of U.S. support for Ukraine, could remove the sanctions when he

takes office.

The EU will have to contend with gas supply disruptions,

said Yevgeny Kogan, professor at Moscow's Higher School of

Economics, while Russia faces extra settlement and payment

problems.

"This may significantly hit (and is already hitting) both

the rouble and flows of foreign currency into the country,"

Kogan said.

The sanctions on Gazprombank and Russia's financial

messaging system complicate financial interactions with Russian

counterparties, likely raising the share of Chinese companies in

Russia's foreign trade, Alfa Bank analysts said.

Russia is already grappling with payment issues due to

Western restrictions blocking its banks from dollar markets and

the SWIFT global payments system, as well as counterparties'

risk of secondary sanctions, particularly as Russia expands

trade with China.

"In the long run, (new sanctions) could mean that Chinese

companies start considering options of direct investment in the

Russian economy and that Russia's economic interaction with

China will become closer," Alfa Bank analysts said.