Asia Alliance Bank announced the suspension of all foreign exchange transactions with Russian residents due to the extension of the US sanctions package. The extension targets any foreign financial institution that engages with sub-sanctioned Russian entities, effectively linking them with Russian defence companies, according to the US Treasury Department. The financial institution retracted its comment shortly after publication, without providing prior notice.
President Joe Biden's December decree authorized the US Treasury Department to impose secondary sanctions on foreign banks conducting transactions with approximately 1,200 entities linked to Russia's military industry. With the upcoming extension, this number will surpass 4,500, encompassing almost all Russian organizations previously sanctioned, regardless of their involvement in the Ukraine conflict. Major Russian banks like Sberbank and VTB will be affected by these measures.
The implementation of secondary sanctions led to a decline in military imports to Russia, as third-country banks are now hesitant to engage with Russian clients due to increased risk. This effect extends to banks with no direct ties to the US, highlighting the broad reach of these sanctions.
Emily Kilcrease, Senior Fellow and Director of the Energy, Economics, and Security Program at CNAS, explained that secondary sanctions allow the US to apply its sanctions to entities beyond its jurisdiction. This approach aims to enhance US sanctions' effectiveness by targeting entities not directly subject to US law.
The US anticipates that tougher secondary sanctions will discourage banks in third countries, particularly in China, from conducting business with Russia. This move is part of a broader strategy to increase pressure on Russia in response to its actions in Ukraine.
UPDATE: The bank later clarified and apologized for the error, stating that it continues to serve clients and comply with relevant legislation:
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