The Last Unsanctioned Russian Bank Falls: Gazprombank's Designation

Nearly three years into the war in Ukraine, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has sanctioned Gazprombank, Russia's largest remaining unsanctioned bank. This move, announced on March 21, 2023, further isolates Russia from the global financial system and hampers its ability to fund its war effort. Let's delve into the implications of this significant development.

Gazprombank, with its extensive international network, has been a critical conduit for Russia's military purchases and soldier payments. However, its designation by OFAC disrupts this flow, making it harder for the Kremlin to evade sanctions and fund its war machine. The bank's six foreign subsidiaries, located in Luxembourg, Hong Kong, Cyprus, Switzerland, and South Africa, have also been blocked, impacting Russia's financial connectivity.

The U.S. sanctions target Gazprombank for operating in the financial services sector of the Russian Federation economy. This action, pursuant to Executive Order 14024, is part of a broader effort by the U.S. and its allies to degrade Russia's ability to project power and threaten the peace and stability of Europe.

The designation of Gazprombank could have significant repercussions for other Russian banks and financial institutions. As the last major unsanctioned Russian bank, its collapse could trigger a chain reaction, potentially leading to the collapse of Russia's financial system. Other banks may face increased scrutiny and risk being targeted next, further isolating Russia from the global financial system.

Russia may adapt by promoting its alternative to SWIFT, the System for Transfer of Financial Messages (SPFS). However, joining SPFS post-OFAC alert raises red flags and increases the risk of further sanctions. Russia's ability to maintain international financial connectivity will be severely challenged, making it difficult to access foreign currency, raise capital, and facilitate international trade.



In conclusion, the sanctioning of Gazprombank is a significant blow to Russia's ability to fund its war effort and maintain international financial connectivity. As the last major unsanctioned Russian bank, its collapse could trigger a chain reaction, further isolating Russia from the global financial system. Investors should closely monitor the situation and consider the potential implications for other Russian banks and financial institutions. The ongoing conflict in Ukraine and the response from the international community will continue to shape the geopolitical and financial landscape, with significant implications for global markets.