World Economy

Russia’s Top Banker Warns Against New US Sanctions

Vladimir Putin (L) and Herman Gref in a meeting at the Kremlin in Moscow (File photo)Vladimir Putin (L) and Herman Gref in a meeting at the Kremlin in Moscow (File photo)

Russia’s top banker says potentially far-ranging new US sanctions would “make the Cold War look like child’s play” if implemented early next year.

Herman Gref, chief executive of Sberbank, told the Financial Times in an interview that possible US sanctions against oligarchs and state-owned corporations would be “irrational” if they went as far as excluding state banks from the Swift payment system.

The idea has been repeatedly floated by western politicians since the US and EU passed the first sanctions against Russia over the Ukraine crisis in 2014, but remained on the shelf as a “nuclear option”.

Worsening relations between the US and Russia has added to fears that exclusion from Swift may now be on the cards. A sweeping new law adopted by the US Congress makes it close to impossible for Donald Trump’s administration to lift existing sanctions against Russia and pushes it to broaden them.

The US Treasury is due to deliver a report to congress by early February on oligarchs and “parastatal entities” close to President Vladimir Putin that is likely to be used as a basis for further action. Under existing sanctions, Russian state banks cannot raise debt on western markets with a maturity of more than 14 days. Bankers fear these sanctions could be further tightened.

An associate of Putin’s since their days in the St Petersburg mayor’s office in the 1990s, Gref, 53, has been one of the most outspoken liberal members of the Russian elite since he left government to head up Sberbank in 2007. Last year, he said Russia was doomed to be an economic “downshifter” due to its stagnant growth and over-reliance on oil and gas exports.

But during that same period, Sberbank has become a roaring success. The once-decrepit state structure has posted record profits for four of the last five quarters, plans to double dividend payouts by 2020, and now espouses Silicon Valley-style tech futurism.

Gref said he is now more hopeful that Putin will implement a broader reform program after his expected re-election next spring. Putin will consider plans, including proposals by former finance minister Alexei Kudrin to massively downsize the state’s role in the economy. Kudrin’s plan is “the most qualified and the best developed,” Gref said. “He’s done so much work and it’d be completely illogical not to use that document.”

But he said that Russia had already significantly caught up with its peers thanks to a new plan by Putin to digitalize the economy.

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