*

Sanctions freeze Gazprombank's US assets, ban trade with

Americans

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Treasury sanctions 50 Russian banks to limit international

financial ties

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Yellen: Action hinders Kremlin's military funding and

equipment

acquisition

(Updates Nov 21 story with exemption on Sakhalin-2 project

transactions until mid-2025 in paragraph 4)

By Timothy Gardner and Daphne Psaledakis

WASHINGTON, Nov 21 (Reuters) - The United States imposed

new sanctions on Russia's Gazprombank on Thursday, the Treasury

Department said, as President Joe Biden steps up actions to

punish Moscow for its invasion of Ukraine before he leaves

office in January.

The move, which wields the department's most powerful

sanctions tool, means Gazprombank cannot handle any new

energy-related transactions that touch the U.S. financial

system, bans its trade with Americans and freezes its U.S.

assets.

Gazprombank is one of Russia's largest banks and is

partially owned by Kremlin-owned gas company Gazprom.

Ukraine has been urging the U.S. since the February 2022

invasion, to impose more sanctions on the bank, which receives

payments for natural gas from Gazprom's customers in Europe.

The sanctions made exemptions for transactions related to

the Sakhalin-2 oil and gas project in Russia's far east until

June 28, 2025, according to an updated general license published

by the Treasury Department on Nov 21. Several Japanese firms buy

liquefied natural gas from Sakhalin-2.

Days earlier, the Biden administration allowed Kyiv to use

U.S. ATACMS missiles to strike Russian territory. Ukraine fired

the weapons, the longest range missiles Washington has supplied

for such attacks on Russia, on Tuesday - the war's 1,000th day.

The Treasury also imposed sanctions on 50 small-to-medium

Russian banks to curtail the country's connections to the

international financial system and prevent it from abusing it to

pay for technology and equipment needed for the war. It warned

that foreign financial institutions that maintain correspondent

relationships with the targeted banks "entails significant

sanctions risk."

"This sweeping action will make it harder for the Kremlin to

evade U.S. sanctions and fund and equip its military," Treasury

Secretary Janet Yellen said. "We will continue to take decisive

steps against any financial channels Russia uses to support its

illegal and unprovoked war in Ukraine."

Gazprombank said Washington's latest move would not affect

its operations. The Russian embassy in Washington did not

respond to requests for comment.

Treasury also issued two new general licenses authorizing

U.S. entities to wind down transactions involving Gazprombank,

among other financial institutions, and to take steps to divest

from debt or equity issued by Gazprombank.

Gazprombank is a conduit for Russia to purchase military

materiel in its war against Ukraine, the Treasury said. The

Russian government also uses the bank to pay its soldiers,

including for combat bonuses, and to compensate the families of

its soldiers killed in the war.

The administration believes the new sanctions improve

Ukraine's position on the battlefield and ability to achieve a

just peace, a source familiar with the matter said.

COLLATERAL IMPACT

While Gazprombank has been on the administration's radar for

years, it has been seen as a last resort because of its focus on

energy and the desire to avoid collateral impact on Europe, a

Washington-based trade lawyer said.

Douglas Jacobson, the lawyer, said other banks outside the

U.S. financial system will be more hesitant to deal with

Gazprombank.

Officials in Slovakia and Hungary said they were studying

the impacts of the new U.S. sanctions.

President-elect Donald Trump would have the power to remove

the sanctions, which were imposed under an executive order by

Biden, if he wants to take a different stance, said Jacobson.

The Trump transition team did not immediately respond to a

request for comment.

Edward Fishman, a former U.S. official now a research

scholar at Columbia University, said Thursday's action was an

important step taking aim at Russia's energy revenues.

"This signals that the Biden administration is actually

serious about cutting off flows of funds to Russia for energy

during the lame duck period, which is ... a significant

development," Fishman said.

The Biden administration may take further actions before

leaving office to toughen up the energy sanctions, Fishman said.

"It's a very big step, but I don't think that it's the last

we'll hear from the Biden administration on energy sanctions."