Two Kremlin-backed banks and the sons of three of Russian President Vladimir Putin’s cronies are among the first targets of US sanctions for what President Joe Biden on Tuesday called “the beginning of a Russian invasion of Ukraine.”
Biden announced the punitive financial measures after Putin ordered his country’s military to “perform peacekeeping functions” in two breakaway regions of eastern Ukraine.
The sanctions prevent the VEB and PSB banks from doing business in the US, cut off their access to the US financial system and freeze any assets under American jurisdiction.
The targeted “elites” — who the Treasury Department suspects of “participating in the Russian regime’s kleptocracy” — are blocked from accessing any property or engaging in any transactions in the US.
In a statement following Biden’s announcement, Treasury Secretary Janet Yellen said the moves would “begin the process of dismantling the Kremlin’s financial network and its ability to fund destabilizing activity in Ukraine and around the world.”
Here’s a closer look at the banks and oligarchs facing sanctions:
VEB
The State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank was established in 2007 under “ad hoc” federal law that allows it to operate independently of the government-controlled bank of Russia, according to Bloomberg News.
The Treasury Department called it “crucial to Russia’s ability to raise funds,” saying that it works with commercial banks to finance large-scale infrastructure and industrial projects.
Its chairman is Igor Shuvalov, a former Russian first deputy prime minister who Putin initially appointed in 2018 and gave a maximum, five-year term in July, according to the government news agency Tass.
In 2014, Foreign Policy magazine reported Shuvalov’s family fortune was worth an estimated $220 million, with the source of his wealth believed to be tied to a deal involving two Russian oligarchs in 2004, when Shuvalov was a Putin economic advisor.
Other members of the VEB board include former Russian President Dmitry Medvedev, according to Bloomberg.
Medvedev became the country’s figurehead leader in 2008 when Putin was barred from seeking a third term in a row and was instead appointed prime minister following Medvedev’s election.
PSB
The Promsvyazbank Public Joint Stock Co., Russia’s eighth-largest financial institution, was nationalized in 2018 and repurposed to finance the defense industry and service large defense contracts as part of a scheme to avoid sanctions on the government, according to the Treasury Department.
It’s provided billions of dollars of support to Russian defense contractors and services almost 70 percent of the contracts issued by the Ministry of Defense, and also underwrites mortgages and provides banking products to military personnel.
“In an effort to insulate itself from U.S. sanctions, the [Russian government] has also tasked PSB with providing credit to entities under U.S. and partner nations’ sanctions so that other lenders, namely Sberbank and VTB Bank, can offload the risk of conducting business with sanctioned entities,” the Treasury Department said.
It’s also reportedly creating a new currency exchange for use by companies targeted by Western sanctions, according to the Treasury Department.
In addition to sanctioning PSB, the Treasury Department said it was taking action against five Russian-flagged ships — a cargo vessel, two oil tankers and two container ships — owned by a subsidiary of the black-listed bank.
Petr Fradkov
Fradkov is the chairman and CEO of PSB and in that role has held working meetings with Putin and taken part in international roundtable discussions where he outlined the bank’s long-term strategic plans for supporting Russia’s defense industry, according to the Treasury Department.
He was sanctioned “for operating or having operated in the defense and related materiel and financial services sectors of the Russian Federation economy,” the Treasury Department said.
Fradkov is also the son of Mikhail Fradkov, a former Russian prime minister and a former director of Russia’s foreign spy service, the SVR.
The elder Fradkov was subjected to sanctions by the US in 2018 for being a Russian government official.
Denis Bortnikov
Bortnikov is a deputy president of Russia’s state-owned VTB Bank Public Joint Stock Co. and a chairman of the VTB Bank Management Board, according to the Treasury Department.
Bortnikov’s father is Aleksandr Bortnikov, the director of Russia’s FSB, the feared federal security service formerly known as the KGB, in which Putin served as a mid-level agent in the former East Germany before embarking on his political career.
Aleksandr Bortnikov is also a permanent member of Russia’s Security Council.
Denis Bortnikov was sanctioned for being a Russian government official and for being the “adult child” of Aleksandr Bortnikov, who was sanctioned last year over his role in the Russian government.
The sanctions against the elder Bortnikov were also renewed, the Treasury Department said.
Vladimir Kiriyenko
Kiriyenko is the CEO of VK Group, which owns VKontakte, a Facebook-style website that’s Russia’s leading social media platform, and was previously a vice president of Rostelecom, Russia’s state-controlled internet, phone and cable TV company.
Kiriyenko’s father, Sergei Kiriyenko, is a former Russian prime minister who now serves as Putin’s first deputy chief of staff and is reportedly his “domestic policy curator,” the Treasury Department said.
Both men were sanctioned for being Russian government officials and sanctions imposed against Sergei Kiriyenko last year were renewed.
His son was also sanctioned for being his “adult child,” the Treasury Department said.
Russian sovereign debt
In addition to targeting the Russian banks and Putin’s cronies, the Treasury Department increased restrictions on dealing in Russia sovereign debt, saying it would “significantly cut off a core way for Russia to raise money” to fund its government and Putin’s plans, “including his further invasion into Ukraine.”
The move prevents US secondary-market sales of bonds issued by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation after March 1.
Last year, Reuters reported that Russian sovereign debt was valued at about $185 billion, about a quarter of which was held by foreign investors and half of that by Americans.
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