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Russian Bank Impacted By US Sanctions Hit By Mini Bank Run Over The Weekend

Tyler Durden's picture




 

Last week, after western sanctions against Russia expanded to include not only the first financial institution, Bank Rosiya, but also SMP bank whose main shareholders were on the sanctions list, unexpectedly both Visa and MasterCard halted providing transaction services to the two banks, without providing an explanation. Over the weekend, one of the banks got its full credit card functionality back after Visa Inc and MasterCard both resumed services for payment transactions for clients at Russia's SMP bank.

As a reminder, SMP, which has about 100 branches covering more than 20 Russian cities, has co-owners Boris Rotenberg and older brother Arkady,  who received large contracts in the Sochi Winter Olympics, and who were both added to the expanded US sanctions list, and as we reported before, SMP had said on Friday that Visa and MasterCard had stopped providing services for payment transactions for clients at Russia's SMP bank. The bank said the decision to stop providing services by Visa and MasterCard was unlawful because the sanctions were imposed on shareholders, not the bank, which said it has no assets in the United States.

"We are glad that the two biggest international payment systems have heard our arguments and reversed their decision to block (SMP bank transactions)," SMP bank CEO Dmitry Kalantyrsky, said in a statement.

What was the purpose of this escalation? Simple: as Reuters reports, SMP Bank said on Monday around 9 billion roubles ($248 million) had been withdrawn by depositors since U.S. sanctions were announced last week.

Washington imposed sanctions on Thursday against 20 Russians close to President Vladimir Putin over Moscow's involvement in the Ukraine crisis, including Boris Rotenberg and his older brother Arkady, the co-owners of SMP Bank.

SMP CEO Dmitry Kalantyrsky told a news conference that an estimated 4 billion roubles had been withdrawn by individuals and 5 billion by organisations.

In other words, the staggered escalations against Russian banks, to which credit card processors have joined without any specific reason, were meant solely to incite a bank panic and to promote bank run conditions. With SMP this succeeded partially, with quarter of a billion withdrawn, however hardly enough to cripple the bank. At least for now.

As Bloomberg reports, as the new Cold War escalates between the West and Russia, the next most likely event is a Russian recession:

Banks including state-run VTB Capital say the world’s ninth-biggest economy will shrink for at least two quarters as penalties for annexing Crimea rattle markets, curb investment and raise the cost of borrowing. Sanctions that have so far focused on individuals via visa bans and asset freezes may be expanded to target specific areas of the economy.

 

President Vladimir Putin sent his popularity surging to a five-year high by making Crimea a part of Russia again after 60 years and says he won’t be swayed by foreign retaliation. Even so, the costs of the decision are starting to unfold, with Russian stocks this year’s worst performers and the economy set to suffer more than the West, said Mircea Geoana, Romania’s government representative for diplomacy and economic projects.

 

“We’re witnessing the start of a new geopolitical and economic Cold War and I think it will take at least two to three years to establish some sort of equilibrium,” he said. “The ones who’ll pay the bill for this aggression, no matter how popular and patriotic it looks, will be the Russian people because there’s a huge difference between the economic force of the EU and the U.S. and that of Russia.”

 

* * *

 

Russia will probably dip into a recession in the second and third quarters of this year as “domestic demand is set to halt on the uncertainty shock and tighter financial conditions,” according to Moscow-based VTB.

 

Russia’s central bank unexpectedly raised its benchmark interest rate by 150 basis points after the armed takeover of Crimea triggered a rout in the ruble. Putin completed his annexation of the Black Sea peninsula March 21.

 

Russia may shun foreign debt markets in 2014 because of higher borrowing costs, according to Finance Minister Anton Siluanov. He expressed frustration at disruptions to MasterCard Inc. and Visa services for cards issued by banks on or linked to persons on the U.S. sanctions list.

 

“Some people say these sanctions won’t affect Russia’s financial system but they already are,” he said March 21.

Of course, as we reported last week, any dramatic deterioration in the Russian economy will simply push it closer to China, which for all intents and purposes is the provider of funding for Western "discretionary spending" anyway, so why not just cut the middleman, and the petrodollar, entirely?

 

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Mon, 03/24/2014 - 08:14 | 4584857 Independent
Independent's picture

Why doesnt Russia have UnionPay system like China???

http://en.wikipedia.org/wiki/China_UnionPay

Only China Man know not to trust Whitey

Mon, 03/24/2014 - 08:50 | 4584941 redd_green
redd_green's picture

Oh yeaahhhh <rolls eyes>  CHinese government MUCH more trustworthy!    WE like melamine in our baby food, lead and arsenic in childrens toys,  and a race to the bottom devaluation of teh Yuan by printing wild amounts of currency.   way more trustworthy.  <grunt>

Mon, 03/24/2014 - 09:01 | 4584980 rsnoble
rsnoble's picture

Some of that's true but don't forget US consumers demand cheap products and Walmart's all too happy to oblige.

Mon, 03/24/2014 - 09:32 | 4585117 loonyleft
loonyleft's picture

name one Chinese seller of baby food with melamine in it.

name one Chinese seller of dog food that poisons dogs.

name one Chinese retailer that sells these items. 

Once again people like you are looking at the left hand while the right is picking your pocket. 

Oh look, there goes a dog with a fluffy tail!

Mon, 03/24/2014 - 11:08 | 4585492 BabylonDeer
BabylonDeer's picture

I believe that the sanctions from Visa/Mastercard just shoot US in the foot. Now that they made this "issue" visible to Russia, she will just start looking for fast solutions to the e-transactions problem.

There are a LOT of alternative systems working in China, and other former Soviet states that can be used as an option. In a couple of months Russia will be inmune to this kind of "sanctions".

Idiots.

Mon, 03/24/2014 - 08:16 | 4584870 ParkAveFlasher
ParkAveFlasher's picture

Ask Tyler for your money back.  Oh wait

Mon, 03/24/2014 - 08:35 | 4584873 GetZeeGold
GetZeeGold's picture

 

 

Is it too late to put all my gold into a MyRa?

Mon, 03/24/2014 - 08:53 | 4584950 redd_green
redd_green's picture

THe whole point of the thing: nothing tangible or with intrinsic value will ever be put into a MyRa.   its a scheme to get us all to put money into government bonds.    You know, the stuff toilet paper is made of.

Mon, 03/24/2014 - 09:28 | 4585098 BlindMonkey
BlindMonkey's picture

Roger that. Thanks for breaking my trust in .gov funding schemes for my benefit. Should I also develop a deep mistrust of SSI and Medicare?

Mon, 03/24/2014 - 08:30 | 4584896 fijisailor
fijisailor's picture

Neglecting important information is what the MSM does best and is why I usually don't read them.  Is ZH starting to take the same path?  I hope not but remaining a questioning mind is always important.

Mon, 03/24/2014 - 08:43 | 4584918 TahoeBilly2012
TahoeBilly2012's picture

It will be interesting to see if Visa Mastercard pay any price for this. It seems like the world is primed to start moving around institutions who do things such as this. Imagine how many housewives got scared going out to buy groceries Friday night and their charges were rejected, would scare the hell out of you, wondering what was next. I actually got an email from a girl I know saying she was scared of war. Fuck you assholes and your chickenhawk Zionist's you take orders from.

Mon, 03/24/2014 - 09:00 | 4584975 RadioactiveRant
RadioactiveRant's picture

I guess Visa/Mastercard are faced with lots of soft sanctions like full auditing of their activities and/or antitrust/monopoly investigations in the US/EU if they don't play ball. Then it becomes a question of which market is worth more, US ($14tn), EU ($16tn) or China ($8.3tn) and Russia ($2tn).

Mon, 03/24/2014 - 09:26 | 4585085 Cacete de Ouro
Cacete de Ouro's picture

Either soft/hard pressure on Visa & Mastercard or they play along willingly. It would be interesting to get a whistleblower's take on it.

Not too dissililar to Inmarsat where one of their four divisions is exclusively for US Government contracts and US Gov makes up 15-20% of Inmarsat revenues.

Mon, 03/24/2014 - 09:26 | 4585086 Cacete de Ouro
Cacete de Ouro's picture

.

Mon, 03/24/2014 - 08:21 | 4584879 Independent
Independent's picture

Yeah well CNBC gets it wrong most of the times, and they hide the facts cause they are run by the Tribe (Comcast owned by Robertson family, dual citizens all of them)

Mon, 03/24/2014 - 08:26 | 4584888 fijisailor
fijisailor's picture

No.  Jim Sinclair is in agreement and posted this chart:

http://d1w116sruyx1mf.cloudfront.net/ee-assets/gsd/yesterday/140321Monet...

Spot the tapering

Mon, 03/24/2014 - 08:35 | 4584905 new game
new game's picture

i was standing on my hands and saw the future-thanks for parrabolic rise to debt heavan, where all are treated equal. angels of money with all needs and desires taken care of! the money tree to heavan; just climb it til you can no long get any ozygen and alas you are in money heavan!

Mon, 03/24/2014 - 09:06 | 4585006 Cacete de Ouro
Cacete de Ouro's picture

A lot of this investmentresearchdynamics article (see link) is conjecture so can't be used as evidence of anything:

Examples:

"it is well-documented that the Bank of England unloaded 1,300 tonnes of gold into the market sometime in April 2013, around the time that the price of gold dropped $200"

This is not a fact. It's guesswork based on a Bank of England web app that just stated the infamous 400,000 bars. If the author wants to assume that because something is written about and becomes "well-documented" then it becomes fact, then that is the author's problem and shows their lack of rigour.

"The price of gold was contained during 2013 by official western Central Bank intervention in the gold market. And it was primarily orchestrated by the Federal Reserve for the purposes of defending the reserve status of the U.S. dollar"

Great, has the author got documented proof of this intervention from the central banks, BIS, and bullion banks? I'd love to see it. I would be the first to applaud you if you had.

Mon, 03/24/2014 - 09:24 | 4585080 fijisailor
fijisailor's picture

Sure documented proof would be best for those claims.  The Problem is that ZH does not even start the discussion as a supposedly unbiased financial web site.

Mon, 03/24/2014 - 09:30 | 4585110 Cacete de Ouro
Cacete de Ouro's picture

ZH when writing their own commentary, always (or maybe usually) tries to use facts though, and usually will make it obvious when it is making assumptions. Guest post articles are another thing entirely and I have seen a lot of guest posts with a lot of dodgy assumptions masquerading as fact.

Mon, 03/24/2014 - 12:02 | 4585731 fijisailor
fijisailor's picture

Just a fact that you should recognize.  The BOE has acknowledged that 1300 tons left their vaults

http://www.investorvillage.com/mbthread.asp?mb=4165&nhValue=37296&nmValu...

So I would call that a fact.

FED manipulation of the gold market?  It is a fact that it has been admitted by the FED in the past, just not in 2013.  So you actually believe that it isn't manipulated now by them?

http://www.redstate.com/diary/private_citizen/2009/09/25/federal-reserve...

Mon, 03/24/2014 - 08:14 | 4584862 ParkAveFlasher
ParkAveFlasher's picture

Yawn...oh wait I mean Yuan.

Mon, 03/24/2014 - 08:20 | 4584863 lolmao500
lolmao500's picture

Bullish :
- Massive fires reportedly spreading inside #Syria|n refugee camps in #Turkey after continuous shelling by #Assad militia since this morning..
- Russian troops sank another ship in #Donuzlav lake. Exit to the sea is now impossible.
- Interestingly shaped closure area off Kerch Straits in effect until 27 Mar
- According to Ukrainian pravda, leaked Russian memo... they plan to take eastern Ukraine, including Kiev and Odessa... if true.. what would be left of western Ukraine would be small and weak...
- Russian forces deployed to Transdnistria begin platoon level training 
- Yulia Tymoshenko says in intercepted telephone call: We must shoot Russians in Ukraine
http://www.youtube.com/watch?v=oEFCmJ-VGhA#t=40
- Ukraine's interim president has ordered full withdrawal of Ukrainian troops from the strategic Black Sea Crimean Peninsula.
- #CRIMEA: Military installations under Russian jurisdiction, all Ukrainian troops left peninsula - Crimean officials

Won't be long now before they are all out of Crimea and Putin can move on to the next objective...

- Second terror attack in Volgograd, Russia, leaves at least 14 dead

And the Ruskies could launch another ICBM between now and March 26.

While in Detroit they plan to cut water to HALF of the population... this will end super well... riots we can believe in.
http://www.detroitnews.com/article/20140321/METRO01/303210035
The Detroit Water and Sewerage Department has a message for Detroit residents and companies more than 60 days late on their water bills: We’re coming for you.

With more than half of the city’s customers behind on payments, the department is gearing up for an aggressive campaign to shut off service to 1,500-3,000 delinquent accounts weekly, said Darryl Latimer, the department’s deputy director.

Including businesses, schools and commercial buildings, there are 323,900 Detroit water and sewerage accounts; 164,938 were overdue for a total of $175 million as of March 6. Residential accounts total 296,115; 154,229 were delinquent for a total of $91.7 million.

Mon, 03/24/2014 - 08:22 | 4584882 GetZeeGold
GetZeeGold's picture

 

 

While in Detroit they plan to cut water to HALF of the population... this will end super well... riots we can believe in.

 

Geez.....who's been running that place?

Mon, 03/24/2014 - 08:33 | 4584899 wmbz
wmbz's picture

Lowlifes and the free shit army. It appears to be working out realy well.

Mon, 03/24/2014 - 09:12 | 4585034 Mrs. Haggy
Mrs. Haggy's picture

Give a man a fish...

Mon, 03/24/2014 - 20:16 | 4588084 StychoKiller
StychoKiller's picture

More like give a man a plunger and a backed-up toilet...hilarity ensues.

Mon, 03/24/2014 - 09:00 | 4584973 redd_green
redd_green's picture

Sounds like you've been hitting the crack pipe for the past 20 years.   They're all broke.  They don't HAVE money fro the water bill, or much else for that matter.  The Romneys of teh world shut the factories down, fired everyone, and setup their companies to purchase manufactured goods from slave labor camps in China.     Go ahead, blame the people who have no job and no where to FIND a job.

Mon, 03/24/2014 - 13:08 | 4586057 MrTown3
MrTown3's picture

shhh...musn't reveal the truth to be people programmed to see outcomes in terms of color only

Mon, 03/24/2014 - 08:22 | 4584883 Winston Churchill
Winston Churchill's picture

Check under your bed you may have missed a bogeyman.

Mon, 03/24/2014 - 08:39 | 4584911 new game
new game's picture

i like bogeyman. he keeps the sheep at bay, i shall not want, til the wolf has eaten all the sheep, then i reveal to you that i am the bogeyman-sleep tite...

Mon, 03/24/2014 - 08:24 | 4584887 Independent
Independent's picture

Good news feeds lolmao I have been saying since day one that Russia will join up with ethnic Russians all the way to the Dnieper river in the middle of the country and also take the south including Odessa and link up to Transnistria and Moldova (the prime wine growing region of Russia and home to some of the finest wines in the world)

Mon, 03/24/2014 - 08:20 | 4584878 NoDebt
NoDebt's picture

Gelgarry Glen Ross shit, but with banks and world economies.  Reminds me I gotta go watch that movie again.

Mon, 03/24/2014 - 08:24 | 4584884 Winston Churchill
Winston Churchill's picture

Prefered the play. myself

Mon, 03/24/2014 - 08:39 | 4584912 Peter Pan
Peter Pan's picture

The approach on both sides is wrong.

All they have to do is pull back to where they were a couple of months ago and agree to a total ban on violence within the Ukraine. I would even say the bulk of the army being sent home. An interim government acceptable to both sides could then be formed which in turn could work out a mutually acceptable living arrangement between all parties involved.

Mon, 03/24/2014 - 08:40 | 4584914 The wheels on t...
The wheels on the bus are going to fall off's picture

Your move Putin..........i would go public and tell Obama he fights like a girl....

Mon, 03/24/2014 - 08:46 | 4584926 post turtle saver
post turtle saver's picture

"... so why not just cut the middleman, and the petrodollar, entirely?"

well sure, being isolated from the largest economies and customers in the world hurts, so the cure is becoming _more isolated_ from them

I think you answered your own question there, just sayin'

Mon, 03/24/2014 - 08:46 | 4584927 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Who needs cruise missiles when you've got sanctions ... ?

Mon, 03/24/2014 - 08:47 | 4584930 new game
new game's picture

offer discount to preferred customers and premiums to adveraries, fostering petro dollar demise.

have fireside chat with china and trade away from west. they  need us, but we sure don't need them(euro).

simple plan to extract pain where it hurts. hey, you started this sanction thing-fuck off, said putin as he walked away...

Mon, 03/24/2014 - 08:53 | 4584952 HastaLaVista
HastaLaVista's picture

These "news" are already obsolete.

(Reuters) - Visa Inc and MasterCard Inc have resumed services for payment transactions for clients at Russia's SMP bank, whose main shareholders were affected by U.S. sanctions, the bank said on Sunday.

http://www.reuters.com/article/2014/03/23/ukraine-crisis-sanctions-smpba...

Nobody in Russia cares about those "sanctioncs" at least for the smallest bank run possible. We still have a lot of fun looking on badly coordinated US and EU  attempts to do something similar to real action :)

Mon, 03/24/2014 - 09:01 | 4584979 post turtle saver
post turtle saver's picture

In a perfect world, we wouldn't have all these problems to begin with... we could all do business together and improve the world as a whole in the process... I have a great respect for the Russian people, but they need to understand the ramifications of the path that Putin has laid out for them... you don't know if the gambit worked until the game is over, many pieces have yet to be developed

as for "real action" no one on either side wants that... "real action" would be WW3

Mon, 03/24/2014 - 08:55 | 4584957 Global Observer
Global Observer's picture

Well, the West just provided a domestic justification to Vladimir Vladimirovich to dump not only Western currencies for foreign trade, but their untrustworthy financial payment systems altogether.

Mon, 03/24/2014 - 09:09 | 4585020 NoWayJose
NoWayJose's picture

Perhaps Visa and Mastercard 'resumed' service due to a subtle hint that their cards might no longer be accepted anywhere in Russia...

Mon, 03/24/2014 - 10:15 | 4585260 dogismycopilot
dogismycopilot's picture

real russian man use cash. plastic is for devuchka.

real russian man have safe at home full of hard currency. leaves wife with Tokarev at home to guard safe behind steel door to apartment.

real russian man has son carry other Tokarev and go to bank with him as driver/guard on payroll days to pay vendors in cash.

(seriously. this is what real russian men who own small businesses do)

edit: Tokarev is a pistol

Mon, 03/24/2014 - 12:39 | 4585924 Kirk2NCC1701
Kirk2NCC1701's picture

Running up your Russian MC and Visa cards to the hilt:  Expensive.

Both companies pulling the plug on services and they trying to collect:  Priceless.

Mon, 03/24/2014 - 16:53 | 4587083 are we there yet
are we there yet's picture

I have a 2 year reentry visa to Russia and like the people there I know, but I will skip going there until things are more stable. However I do like the ruble exchange rate right now for travel.

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