Going back to the original round of sanctions, I have been arguing that the terms of US sanctions have been left deliberately vague in order to make banks and investors very cautious about dealing with sanctioned firms. Spreading fear, uncertainty, and doubt-FUD-leverages the effect of sanctions.
When I read the last round of sanctions, I had many questions, and hence many doubts about actually how far the sanctions would reach. I was not alone. Professionals-lawyers at banks and Wall Street law firms-are also uncertain:
But compliance officers at some U.S. banks and broker-dealers say the sanctions, issued by Treasury’s Office of Foreign Assets Control (OFAC), are not clear enough. That has left financial institutions guessing, in certain instances, at how to comply. They worry they are vulnerable to punitive action by U.S. regulators.
Fear, uncertainty, and doubt, all in one paragraph. The fear part is particularly interesting, and quite real, especially in the aftermath of the truly punitive action by U.S. regulators in the BNP-Paribas case.
OFAC-The Office of Foreign Asset Control, which is in charge of overseeing the sanctions-is in no hurry to clarify matters:
Another senior compliance officer at a major U.S. bank said bankers “are frustrated that OFAC is not providing more guidance.”
The day after the sanctions were issued, OFAC held a conference call with hundreds of financial services industry professionals in an effort to answer concerns. Although some issues were cleared up, others were left undecided, said two sources who were on the call.
Dear Mr. Senior Compliance Officer: that’s on purpose. Believe me.
A new round of sanctions may be imminent. I am hoping to be proven wrong in my forecasts, because reports are that the Europeans are going to do something serious. Add serious doubts to serious action, and American and European banks won’t touch most Russian banks or major companies with a 10 foot pole while wearing a hazmat suit. That will cause some major economic problems for Putin and Russia. Not 1998-magnitude problems, but maybe something bordering on 2008 problems, although a $100+ oil price will help contain the damage, despite the added difficulties that sanctions will create for the Russians to cash the checks for that oil.
Then it will be Vlad’s move. What that move will be, I do not know.