On the anniversary of the Russian invasion of Ukraine (Feb. 24, 2023), many countries imposed additional sanctions against Russia. Due to disagreements between member states, the European Union was unable to meet the deadline - the sanctions package was adopted a day later, on the evening of February 25. Among other things, sanctions were imposed on three private banks (Alfa-Bank, Rosbank, Tinkoff Bank) and the so-called Fund for National Prosperity. What organizations are these?
The National Prosperity Fund is a reserve fund into which part of Russia's oil revenues have been poured. Its original purpose was to stabilize the Russian pension system. Since the outbreak of war in Ukraine, the fund has been used to cover Russia's budget deficit. The inclusion of the fund in the sanctions list is not expected to have any additional impact on the Russian economy, as the fund is managed by the Russian Central Bank, whose funds are already frozen in the EU.
Sanctions were imposed on three Russian banks on the grounds that they are the largest Russian banks that provide a significant amount of revenue to the Russian budget and thus contribute to the continuation of the war in Ukraine. It is interesting to understand what is behind this general wording.
Alfa Bank is the largest private bank in Russia (4th in terms of assets and 4th in terms of number of clients). The bank was already on the U.S. sanctions list, and its beneficial owners (including Mikhail Fridman and Petr Aven) were previously on EU sanctions lists, although they have tried to distance themselves from the Russian government in recent years.
Tinkoff Bank is another large Russian bank (third largest bank by number of customers, only state-owned banks - Sberbank and VTB Bank - have more customers). The founder of the bank, Oleg Tinkov, was considered not to be close to the Russian government, clearly condemned the Russian invasion of Ukraine and even gave up his Russian citizenship. Under government pressure, the businessman was forced to sell the bank below value in April 2022 to a company with ties to Vladimir Potanin.
Rosbank is another major bank that belongs to the French financial group Société Générale until 2022. After the outbreak of war, the French company left Russia and the bank was also bought by a company associated with Vladimir Potanin.
In this context, the person of Vladimir Potanin, who has taken over two large banks, is interesting. Although he is the second richest man in Russia and has benefited to some extent from the war in Ukraine, he is not on the EU sanctions list. This is likely due to the fact that Potanin is the ultimate beneficiary of nornickel, the world's largest producer of nickel (15% of world production) and palladium (40% of world production). These metals are among the critical raw materials needed for the energy transition in the EU.
Overall, it can be said that these sanctions were not imposed because of specific activities of financial institutions related to the war in Ukraine. At least before the war, they were relatively independent private banks by Russian standards, but the EU reasonably assumes that such large banks, if not affected by sanctions, could theoretically be used to circumvent European sanctions. The banks themselves, of course, have had time over the past year to prepare for such sanctions in order to minimize their negative impact.