On May 22, 2024, US Treasury Secretary Janet Yellen urged German bank executives to intensify their compliance with sanctions against Russia, stop efforts to circumvent sanctions, and avoid potential penalties that could lead to their banks being cut off from using the US dollar.
According to Reuters, Yellen made these remarks during a meeting with German bankers on Tuesday (May 21), where she highlighted the recent authorization by the US Treasury to implement secondary sanctions on banks aiding military-related transactions with Russia. These sanctions aim to hinder Russia’s efforts to procure resources needed for the conflict in Ukraine.
Yellen stated, “Russia continues to procure sensitive materials and expand its domestic manufacturing capabilities for these items. We must remain vigilant and redouble our efforts.”
Speaking at the meeting in Frankfurt, Germany, she called on all institutions present to take stricter compliance measures and increase vigilance against Russian evasion attempts.
Yellen issued a direct warning, demanding that executives oversee their bank’s foreign branches and subsidiaries to comply with sanctions, and require foreign correspondent banking clients to do the same, especially in high-risk jurisdictions.
She emphasized, “Russia is eager to obtain critical resources from developed economies such as Germany and the United States. We must remain vigilant to prevent the Kremlin from supplying its defense industrial base and using our financial system to achieve this goal.”
Shortly before Yellen’s warning, the US Treasury successfully pressured Raiffeisen Bank International (RBI), an Austrian bank, to abandon a deal involving a transaction with a Russian oligarch.
Under intense US pressure earlier this month, RBI gave up a 1.5 billion euro (1.6 billion USD) industrial stake deal related to Russian magnate Oleg Deripaska.
The failure of this transaction marked a setback for the bank, which has faced criticism for its ties to Moscow since Russia’s invasion of Ukraine, highlighting Washington’s discontent and condemnation of European banks’ relationships with Russia.
A source told Reuters that the US Treasury had formally warned RBI that its entry into the US financial system could be restricted due to its dealings with Russia.
On May 6, US Treasury Deputy Secretary Wally Adeyemo wrote to RBI expressing concerns about the bank’s presence in Russia and a $1.5 billion deal.
Prior to the announcement by RBI, its plan to purchase shares in the construction group Strabag had faced weeks of pressure, aimed at unlocking frozen bank funds in Russia.
A senior US Treasury official acknowledged that Western banks face “many constraints” when exiting Russia, but they should not seek to expand their business in Russia like RBI. The official added that Austrian regulatory authorities should take a more proactive stance to avoid the risk of systemic damage to institutions’ reputations.
The official stated that the Treasury will implement secondary bank sanctions “cautiously” and collaborate with banks to ensure compliance. He said, “The mere existence of secondary sanctions has helped us achieve some of our goals in certain areas.”
Spokespersons for Germany’s two largest banks, Deutsche Bank and Commerzbank, stated that they have significantly reduced their business in Russia and are complying with sanctions.
Yellen expressed particular concern about evading sanctions against Russia through China, the UAE, and Turkey. She mentioned that the Treasury is “working to thwart any circumvention of sanctions we see in Central Asia, the Caucasus, and across Europe.”