“The application of new illegal sanctions against Russian organizations due to the aggravation of the current geopolitical situation creates not only new risks, but also new opportunities for Russian organizations in respect of which they are introduced,” the Ministry of Economic Development said in a letter addressed to banks that could become potential participants of the program (a copy is available from RBC). The ministry invites Russian businesses to come to Crimea and Sevastopol and, among other things, start “crediting investment projects in tourism, housing construction, and agriculture” there, followed from the letter.
The fact that the banks that fell under the sanctions will be able to start working in the Crimea, March 16 declared Anatoly Aksakov, head of the Duma committee on the financial market. “Now there are no grounds, risks and excuses for not working in Crimea,” the deputy said.
Read on RBC Pro
Sanction risks
“Technically, it would be incorrect to argue that the sanctions regime against Crimea, which has been in force since 2014, and all the packages of new sanctions taken together (starting from February 22) against Russia, including the financial sector, have equalized, would be incorrect. Still, Crimea is under a complete embargo (in the American sanctions law “comprehensively sanctioned territories”), while the rest of Russia is not,” says George Voloshin, director of the French branch of the consulting company Aperio Intelligence. For many organizations – for example, banks recently included in the US SDN list – it really does not matter now whether they have operations in Crimea or not. However, in the case of Sberbank, which is subject to limited US sanctions, banks that have evaded sanctions or are subject to milder sectoral sanctions, as well as companies controlled by Russian business leaders who are not on the sanctions list, entering the Crimean market is not the optimal solution. Voloshin argues.
On March 16, RBC sent requests to credit organizations about their readiness to start working on the peninsula. Otkritie (the bank was on the SDN sanctions list) is not currently considering allocating additional resources to expand the network, a bank representative said at the time: “We are focused on maintaining quality service and meeting the needs of our customers in more than 70 regions of Russia, where already there are bank offices. But the bank did not respond to the request dated March 17. Sberbank (not included in the SDN list, but faced with a ban on correspondent relations with US banks) declined to comment. VTB, Sovcombank and Novikombank — banks also listed on the SDN list at the end of February — had not responded to inquiries as of press time.
VEB.RF [попал в список SDN 22 февраля] and previously worked in the Crimea, and intends to increase cooperation with the region in projects aimed at developing the urban economy and improving the quality of life of people, ”a representative of the state corporation told RBC.
Companies that “have nothing more to lose” have no reason to avoid being present on the peninsula, Dmitry Kazakov, a leading lawyer in the M&A transaction support practice at Lemchik, Krupsky and Partners law firm, believes. But in the long run, things are not so clear-cut, he believes. “Inclusion on the sanctions lists for several reasons means that it will be more difficult to get out of the sanctions. That is, when the grounds associated with the military operation are removed [на Украине], this does not mean that the grounds associated with the physical presence in the Crimea will be removed, ”Kazakov argues. For investors engaged in international interaction (for example, those with foreign capital, buying or selling goods abroad or taking loans there), access to Crimea still carries risks, the lawyer reminds.
Banking system of Crimea
Now three banks are fully operating on the peninsula: the state-owned RNKB, Rossiya Bank, which fell under sanctions back in 2014, and Genbank. Two more banks – the Black Sea Bank for Development and Reconstruction and the Industrial Savings Bank – are also under US sanctions and are currently being sanitized.
Residents and entrepreneurs of the peninsula traditionally complain about the lack of a large selection of financial institutions and, as a result, prohibitive rates on loans. “Expansion of financial market participants will, first of all, make it possible to provide wide access to banking products for citizens. In fact, the decision of banks to open their branches in Crimea is a social measure,” says Tatyana Karavaeva, Vice President, Head of Spatial Development at the Center for Strategic Development. At the same time, access to products for enterprises and organizations will also open, which will stimulate the attraction of additional resources and launch them into the region’s economy, she expects.
Sergey Lapenko, chairman of the Crimean republican branch of Opora Rossii, said that in the conditions of a virtually closed outside world, the previously “forbidden” Crimea could become investment attractive. In March 2021, Vladimir Putin instructed to ensure the inflow of private investment in Crimea in the amount of 1 trillion rubles. until 2025.