Russia Threatens Retaliation After JPMorgan Blocks Embassy Money Transfer

April 2, 2014Russiaby EW News Desk Team

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Russia’s foreign ministry has threatened to impede the operations of American diplomatic missions in the country, after U.S. bank JPMorgan Chase on Tuesday blocked a remittance from the Russian embassy in Kazakhstan to an insurance agency.

The Russian embassy had been due to transfer less than $5,000 to the Sogaz Insurance Group for regular services rendered, according to the Financial Times, but JPMorgan halted the transaction as Sogaz was part-owned by Bank Rossiya, one of the targets of US sanctions announced on March 20.

Interfering with the transaction was an “absolutely unacceptable, illegal and absurd decision,” Alexander Lukashevich, a foreign ministry spokesman, said in a statement.

“If the American financial structure is expected to earn points in the eyes of the White House in this way, then that decidedly goes too far,” the ministry added.

“In Washington they need to understand: any hostile acts against Russian diplomatic missions not just constitute violations of international law, but are also likely to lead to counter-steps which will inevitably affect the work of the embassy and general consulates of the US in Russia. In that sense, JPMorgan Chase has done the US administration a disservice,” it further claimed.

JPMorgan later said it had temporarily halted the fund transfer as it first needed approval from the U.S. government.

“As with all U.S. financial institutions that operate globally, we are subject to specific regulatory requirements,” they said. “We will continue to seek guidance from the U.S. government on implementing their recent sanctions.”

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The insurance company, Sogaz had not been mentioned in any of Washington’s sanctions against Russia. 51 percent of its shares though used to be controlled by Bank Rossiya, owned by Russian businessman Yury Kovalchuk, who was included on the list. However, on March 11, SOGAZ regained its controlling stake after buying shares from the bank’s subsidiary, Abros.

Chris Weafer, a partner at Macro Advisory, suggested that U.S. financial institutions were now wary of going against U.S. regulations, given recent losses.

"There is almost self-sanctioning going on,” Weafer told Reuters. “There is a lot of confusion ... as to what might be the full scope of the sanctions and what we are hearing is while the sanctions are specific, a lot of U.S. companies are adopting a much more risk-averse or cautious approach,” he said.

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