America's biggest bank has inadvertently picked a fight with the Russian government, simply by going along with financial sanctions imposed by the U.S. because of the Crimean crisis.
The problem began when JPMorgan Chase blocked a payment from the Russian embassy in Astana, Kazakhstan, to the Sogaz Insurance Group, a Russian company that is owned in part by Bank Rossiya. Rossiya, which is the bank of choice for many high-ranking Russian officials, has become the target of U.S. financial sanctions as punishment for the Russian annexation of Crimea. That means American banks are forbidden with doing business with Rossiya, so JPMorgan blocked the money transfer, preventing a small arm of the Russian government from doing its regular business.
So nearly month into Washington's attempt to put financial pressure on Moscow, the U.S. sanctions claimed their first victim: an insurance payment that was less than $5,000.
Even so, the Foreign Ministry in Moscow was none too pleased with the blocked payment, saying: “We consider JPMorgan Chase’s decision ... to be absolutely unacceptable, illegal, and absurd. The US needs to understand that any hostile actions against a Russian diplomatic mission are not only a highly egregious violation of international law, but open the door to retaliation that will inevitably affect the work of the U.S. Embassy and consulates in Russia.”
A Sogaz official called the blocked payment “a misunderstanding that can and probably will be resolved”. Bank Rossiya does not hold a majority stake in Sogaz at this time, reducing their holding from 51 percent to 48.5 percent on March 11, nine days before Bank Rossiya was sanctioned by the United States. Based on this reducing shareholding, Sogaz believes that it should not be punished by Bank Rossiya’s sanctions.
Technically, JPMorgan “could still process the embassy payment if U.S. regulators approve,” but it seems that they are not taking any chances when it comes to the possibility of doing business with the bank Putin sends his direct deposits to. JPMorgan Chase issued this statement about the snafu: “As with all U.S. financial institutions that operate globally, we are subject to specific regulatory requirements. We will continue to seek guidance from the U.S. government on implementing their recent sanctions."