Russia confiscated $440 million from the largest American bank, JPMorgan

A Russian court has ordered the seizure of JPMorgan Chase’s funds in Russia totaling $439.5 million, a week after Russia’s VTB bank launched legal action against the largest U.S. bank to recover its money blocked abroad under the U.S. sanctions regime. Washington.

This move by Russia highlights some of the negative consequences that Western companies are experiencing from the punitive measures against Moscow, commented the Financial Times. It is also further evidence of the difficulties Western creditors are facing as they try to meet their commitments to close their operations in Russia after February 2022.

The seizure order, published in the Russian court registry on Wednesday, targeted funds in JPMorgan’s accounts and shares in its Russian affiliates, according to the ruling issued by the arbitration court in St. Petersburg. The assets were frozen by the authorities as a result of Western sanctions.

The dispute centers around $439 million in funds that VTB holds in a JPMorgan account in the US. When Washington imposed sanctions on the Russian bank, JPMorgan had to move the funds into a separate escrow account. Under the US sanctions regime, neither VTB nor JPMorgan have access to the funds. In response, VTB last week sued the New York-based financial group to demand that Russian authorities freeze the equivalent amount in Russia, warning that JPMorgan was seeking to leave Russia and would refuse to pay any compensation.

The next day, JPMorgan filed its own lawsuit against the Russian lender in a US court to prevent its assets from being seized, arguing that it had no way of getting VTB’s frozen US funds back to offset its own potential losses from the Russian claim. JPMorgan and VTB declined to comment on the decision.

When JPMorgan and Goldman Sachs announced their intention to close their businesses in Russia, experts warned that any exit could take more than a year. Other Western banks, including Citigroup, Italy’s UniCredit and Austria’s Raiffeisen Bank International, still operate in Russia. Following a decree issued in 2022, Russia’s exit requires the green light from President Vladimir Putin himself. Seven banks – out of 45 then operating in the country – received presidential approval, including Mercedes-Benz Bank, Ikano, J&T and Intesa.

In early 2022, Russia also banned shareholders from “unfriendly countries”, including the US, from withdrawing their dividends. Last summer, a Russian court froze about $36 million worth of assets owned by Goldman following a lawsuit by state-owned bank Otkritie. A few months later, the court ruled that the Wall Street investment bank must pay the funds to Discovery.

In March 2023, another Russian court seized Volkswagen’s assets in Russia worth $204 million pending a lawsuit brought by its former partner Gaz Group, owned by sanctions-hit oligarch Oleg Deripaska. The assets were later unfrozen as VW received permission from Russian authorities to sell its Russian business to Avilon, one of the country’s largest car dealers.

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