Russian Bank Seizes $440 Million from JP Morgan Amid Escalating Tensions: Cold War Corporate Battles

2024-04-24 19:55:05

That’s almost half a billion dollars, 440 million to be exact, that Russia is preparing to grab right under the nose of JP Morgan. The American bank was imposed such a sanction in mid-April by an arbitration court in St. Petersburg in a dispute with fellow Russian bank VTB. It was first published this Wednesday.

According to Bloomberg and the Financial Times, the Russian institution justified this express seizure by saying that JP Morgan is in the process of organizing the exit of its assets from the country. The latter also sees a stake in the subsidiary of a Russian bank and other property rights to brands confiscated.

An eye for an eye, a tooth for a tooth, the court decision comes a week after VTB’s complaint after US sanctions against its own interests. JP Morgan has a fund of $440 million from the Russian bank in the United States that had to be moved to another inaccessible escrow account. Consequently, JP Morgan ended up filing a complaint last week in US courts against VTB, claiming it was not responsible for sequestering the client’s assets.

Held captive

It is a new episode in the Cold War that the West and Russia have conducted through businesses since the start of the war in Ukraine. Following sanctions from Ukraine’s allies, Vladimir Putin declared in 2022 an obligation for the banks to obtain a decree from the Kremlin to leave the country. Fewer than ten establishments have been given the right to withdraw from Russia out of the 45 present, for example Mercedes-Benz Bank or Intesa.

Western companies are trapped in place. Those who continue to carry out their activities like Leroy Merlin have to deal with American and European sanctions that terribly complicate supplies, especially by cooperating with local suppliers.

Those who try to leave many feathers behind, their assets are often bought at a low price by local or nationalized companies and offered to those close to the regime in place. This last scenario hit Danone for example or Heineken . Since last year, a ” exit tax » of at least 5% of the market value of the relevant assets has been added.

American retaliation

Lists of friendly or hostile companies would circulate among the authorities who had told it “Les Echos” . At the beginning of the year, the head of Italian Unicredit explained: “Our strategy in Russia remains unchanged, we continue to reduce our activities. If we found the right buyer we would sell, but at the moment that is not the case.”

Other players such as Crédit Agricole manage to gradually taper off, having divided their exposure by more than three to 1.3 billion euros.

Since December last year, American pressure has increased a notch, because Washington promises retaliation in its market to non-American banks that finance individuals or companies under sanctions.

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