In what is the first action by a large U.S. financial institution as a result of sanctions against Russia, mega-bank J.P. Morgan Chase & Co. (NYSE: JPM) blocked a transfer of funds from Russia’s embassy in Astana, Kazakhstan, to Russian insurance company Sogaz, which is partly owned by Bank Rossiya. The bank is one of the individuals and organizations on the Treasury Department’s sanction list.
According to a report in the Financial Times, the amount involved was less than $5,000.
Russia’s foreign ministry reacted quickly:
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.
J.P. Morgan also issued a statement:
As with all US financial institutions that operate globally, we are subject to specific regulatory requirements. We will continue to seek guidance from the US government on implementing their recent sanctions.
The bank could process the payment if the Treasury Department approves the transfer, one source told Bloomberg News.
Russia of course is threatening retaliation against U.S. diplomats in Russia:
Any hostile actions against the Russian diplomatic mission are not only a grossest violation of international law, but are also fraught with countermeasures that unavoidably will affect activities of the embassy and consulates of the U.S. in Russia.
In a similar case involving credit card transactions, the Treasury Department did allow Visa Inc. (NYSE: V) to process transactions for SMP Bank, but it did not lift the restrictions on transactions at Bank Rossiya.
J.P. Morgan reported that its exposure to Russia totaled $4.7 billion in 2013, of which $4.7 billion is in loans and $700 million is in trading and investing. That makes Russia just the 18th largest market for the bank.