No sooner had the sensation of the package of US sanctions against the Russian banking sector (in particular, the disconnection of Gazprombank from the SWIFT international banking system) cooled down, than a new one appeared. The governments of Türkiye and several EU countries, as well as the European Commission, are allegedly asking the United States to reconsider the sanctions measure. These reports came at a time when Russia launched another series of missile attacks on civilian targets in Ukrainian cities such as Kryvyi Rih and Zaporizhzhia, resulting in the deaths of civilians. It is probably not difficult to imagine what Ukrainians feel when they read the news from Zaporizhzhia and Brussels at the same time. The cynicism of Viktor Orban, Recep Erdogan or Robert Fico is no surprise to anyone. What is surprising, however, are those in Brussels who declare humanism and support for Ukraine but for whom Ukrainian lives are worthless compared to Russian gas and money. But let’s put everything in order.
A little about Gazprombank
Gazprombank is around the same age as Gazprom. Both emerged in the late Soviet period. The Gazprom state gas production concern was born in August 1989, and the Commercial Bank for the Gas Industry — Gazprombank — was born a year later, at the end of July 1990. The Soviet period of their history was short-lived. Later, both structures began to serve the interests of the Kremlin and the gas oligarchy it controlled. In the case of Gazprom, the gas it exported was not just a commodity, but a weapon, a mechanism for Russia's expansion in Europe. So was Gazprombank. The money on its accounts from the gas sold by Gazprom was not just revenue, but in the “skilled hands” it was a corrupting tool aimed at bribing the ruling elites in the politics of European countries. Mao Zedong said that a rifle breeds power. However, when the rough revenues from gas started flowing in, Moscow decided: why do we need a rifle when we have Gazprom’s money? And this money, through Gazprombank and a tangled chain of intermediate links, gave rise to various sorts of influence, including public ones, through the Gazprom-Media holding, which has been 100% owned by this financial institution since 2005. The mechanisms of “elegant corruption” were refined to a high art after the arrival of St. Petersburg’s KGB officers.
Gazprombank is not just one of the five largest banks in Russia (third in terms of assets after Sberbank and VTB). Its foreign offices have served as a cover for the work of Russian foreign intelligence. The bank had and still has numerous consultants not only in its core business. Their task was to launch Gazprom’s tentacles of gas corruption through schemes that would guarantee European politicians and officials an alibi. Schemes of “elegant corruption” were also created under the roof of Gazprombank, especially through its foreign branches.
In Ukraine, few people remember the gas corruption scheme of the country’s political elite in the form of the Swiss company Rosukrenergo (RUE), approved in Yalta at the summit of Presidents Leonid Kuchma and Vladimir Putin 20 years ago. Even fewer people remember that the founder of RUE on the Russian side was a subsidiary of Gazprombank with a Swiss residence permit, Arosgaz Holding. And in 2009, Gazprombank (Switzerland) appeared in Zurich through the acquisition by the parent structure of Russische Kommerzial Bank AG, which since 1966 had been serving Soviet foreign trade and the needs of the agents of the First Main Directorate of the KGB of the USSR (now the Russian Foreign Intelligence Service)...
Gazprombank (Switzerland)’s activity in Europe has attracted increased attention from the Swiss regulator FINMA, which in 2018 banned it from attracting new clients and appointed a special external observer to monitor its activities. Based on financial monitoring data, the regulator indicated that in 2006–2016, the bank had committed serious violations of Swiss anti-money laundering/legalization of criminal proceeds regulatory norms. The banking service for Russian mafia groups under the Kremlin’s cover probably caught the eye of the Swiss.
After Russia’s full-scale invasion of Ukraine started, the bank was sanctioned but not disconnected from SWIFT. The bank’s operations at its European base in Switzerland had to be shut down in 2022. In 2023, four employees of Gazprombank (Switzerland), including its CEO Roman Abdulin, were accused of helping Putin’s “wallet” Sergey Roldugin circumvent financial rules and sanctions imposed on Russia. They got off with suspended sentences and large fines.
A blow that was expected
On November 21, the US Treasury Department’s Office of Foreign Assets Control (OFAC), the agency responsible for US sanctions, announced a new large-scale package of restrictions against the Russian financial sector. In total, according to the US Treasury Department, more than 50 Russian banks, more than 40 Russian securities registrars and 15 Russians related to finance have been sanctioned.
However, the most significant figure on the new list is Gazprombank and six of its foreign subsidiaries in Hong Kong, Luxembourg, Switzerland, South Africa and Cyprus. According to the information from the Department of the Treasury, Russia uses the bank to purchase military equipment for the war in Ukraine and transfer payments to the Russian military. The bank did not hide the fact that, in addition to gas companies, banking services are provided to business entities in other industries — nuclear, military, chemical, including speciality chemicals — that produce explosives, etc.
After the start of the full-scale invasion of Ukraine by the Russian armed forces, this bank became the main financial center in the Russian economy under sanctions and has remained the only state-owned credit institution capable of making currency transfers within Russia and abroad for two years. In March 2022, the Russian Federation passed a law requiring buyers of Russian gas and other goods from “unfriendly” countries to make payments for raw materials in rubles — through Gazprombank.
Sanctions have hit many of Russia’s export destinations. For example, Hungary has stated that Washington’s latest sanctions move against Russia has seriously affected Hungarian payments in the following areas: payment for fuel assemblies supplied by Rosatom’s subsidiary Tvell to the Hungarian Paks NPP; payment for gas transportation via the Turkish Stream transit route; and payments to Gazprom itself for the gas supplied.
Despite the fact that Hungary and Russia said they had found a way to resolve the payment problems, Budapest asked the United States to make exceptions to the sanctions against Gazprombank for payments for the gas from Russia. Türkiye has already made similar requests to the United States. Without the lifting of sanctions, “we will not be able to pay Russia,” Energy Minister Alparslan Bayraktar told reporters the day before. “If we cannot pay, we will not be able to buy goods... If sanctions are not lifted, this could have very serious consequences for Turkey,” he said. Russia is the largest gas supplier to Türkiye, accounting for about 42% of its imports last year, according to the regulator.
In general, Türkiye, Hungary, Greece, Slovakia, Serbia, Bulgaria and Italy may face problems with payments for Russian gas. It is expected that the crisis will be most seriously felt in January, when the time for new payments comes.
The Kremlin promised to find a solution to continue trade. And it was found. According to Vladimir Putin’s decree of December 5, Gazprombank remains the authorized bank for payments for Russian energy, but it is allowed to involve third parties. If Gazprombank does not receive a license from sOFAC to continue energy payments, Gazprom will find another agent bank among the licensed ones (including all Russian giants, including Sberbank) to accept payments and may even start to develop trade in currencies alternative to the dollar and euro.
Regardless of whether the US makes an exception for Gazprombank for energy payments or not, the precedent and the constant risk of such sanctions is a powerful signal to all buyers of Russian energy that such supplies are unreliable and risky. This will force them to look for alternative suppliers and gradually abandon energy purchases from Russia.
The ruble in a tailspin
In addition to long-term risks for energy trade, which, despite the decline in volumes after the break with key European consumers, remains an important source of budget revenues (and, consequently, the sustainability of the entire Russian economy), sanctions have an immediate effect in the form of increased pressure on the ruble.
Immediately after the imposition of sanctions, the official exchange rate of the US currency fell to its lowest level since the beginning of the war — 109 rubles to the dollar. A similar drop was observed in the Chinese yuan, which largely replaced dollars and euros in foreign trade after sanctions cut Russia off from most transactions with Western companies and banks.
Apart from being emotionally important for the Russian population, this significant depreciation of the ruble also has a very significant impact on the Russian economy. Imported goods will become much more expensive, which will continue to push up inflation in Russia that the central bank is fighting in vain. Even setting the refinancing operations rate at a sky-high 21% does not help. Such a significant weakening of the ruble will also lead to a significant rise in the price of imported military goods, which Russia still continues to receive through third countries.
For Ukraine, these sanctions have a positive effect, as the decline in export revenues and the deteriorating economic situation in Russia will force Moscow to negotiate. As a reminder, energy export revenues are the main source of revenue for the Russian budget. And in 2025, the Kremlin plans to spend 13.5 trillion rubles ($136 billion at the current exchange rate) on military expenditures under the “National Defense” line, which is 6.31% of Russia’s GDP. Together with the line “National Security and Law Enforcement,” this amounts to 41% of all federal budget expenditures.
European Commission defends Gazprombank?
The intentions of some Europeans to adjust the US sanctions against Gazprombank is evidence of how resilient the gas corruption octopus is in Europe. The German and Austrian chancellors, as well as the heads of government in Hungary and Slovakia, who have been fed by Russia, are just the tip of the iceberg. Even after Putin’s decree abandoned the requirement that foreign buyers use only Gazprombank when purchasing Russian gas, the European side continues to insist that the United States change its restrictions.
At the same time, Luxembourg or, more specifically, GPB International, a subsidiary of Gazprombank, suddenly appeared on the horizon in this another quiet European haven of Russian scheming, “elegant corruption” and backroom influence. GPB International has been successfully operating in Europe since 2013. In a situation where the June sanctions imposed by the US Treasury Department led to the suspension of dollar and euro trading on the Moscow Stock Exchange, Gazprombank and its Luxembourg-based “bridgehead” found themselves in a rather favorable position, as they were not disconnected from SWIFT. The Kremlin thus retained the ability to make the necessary impact through this important channel, especially after the loss of the Swiss “bridgehead.” It is worth mentioning that the Luxembourg Foreign Minister recently spoke out against Ukraine’s membership in NATO.
The issue of making payments through the Luxembourg subsidiary of Gazprombank is now being discussed. This seems to be the most pressing issue for Viktor Orban, who has sent Peter Szijjarto to negotiate in all areas. Budapest sees three options that the Hungarian minister has mentioned:
- the US granting Gazprombank an exception to sanctions for payments for energy resources;
- agreements between the countries receiving Russian gas and the United States on OFAC’s authorization for transactions with Gazprombank, similar to what Japan did for the Sakhalin-2 project;
- changing the “gas for rubles” payment scheme or even completely canceling it by engaging intermediary banks from Russia-leaning Türkiye, Azerbaijan or Serbia.
It seems that the “Budapest tail” wants to wag the “Brussels dog.” The European Commission is undergoing a test of resilience, as is the American OFAC.
It is now important for Ukrainian diplomacy to work with the European Commission and the US Department of the Treasury to prevent a rollback in sanctions. But to do so, we need to be consistent ourselves. It is necessary to deprive Russia of up to $12 billion in revenue annually by terminating transit services for Russian oil and gas to some of Moscow’s European satrapies. Unfortunately, Ukraine has not yet imposed appropriate sanctions or stopped transit, even though the great war is in its third year.