By Pam Martens and Russ Martens: March 11, 2022 ~
Russia began its brutal invasion of Ukraine on February 24. Two days later the European Commission, U.S., U.K. and Canada announced sweeping sanctions, which have grown in granular details since then. By early this week, hundreds of corporations with the most famous brands in the world had announced that they were closing their stores in Russia, or ceasing to ship their products there, or severing joint business operations in a rebuke to Russia’s illegal war in Ukraine.
But it wasn’t until this past Wednesday that anyone heard a peep from the largest U.S. banks on Wall Street about their plans to cease operations in Russia. Citigroup made its ambiguous announcement on Wednesday, March 9, followed by equally vague statements by Goldman Sachs and JPMorgan Chase on Thursday, March 10.
A slogan of “The Coalition of the Timid” came to mind.
Citigroup’s statement was officially released by Edward Skyler, Executive Vice President of Global Public Affairs. It read in part:
“We are continuing our previously announced efforts to exit our consumer banking business in Russia. As we work toward that exit, we are operating that business on a more limited basis given current circumstances and obligations. We are also supporting our corporate clients in Russia, including many American and European multi-national corporations who we are helping as they suspend or unwind their business. With the Russian economy in the process of being disconnected from the global financial system as a consequence of the invasion, we continue to assess our operations in the country.”
Citigroup has the most extensive operations in Russia of any other U.S. bank. Its Russian website reports that it is “a key banking partner” for about 3,000 corporate clients; has branches servicing approximately 500,000 individual customers in 10 major cities in Russia. It provides the following services: “…cash management, trade finance, investment banking, corporate finance, lending, foreign exchange and hedging services, securities services, issuer services and retail banking solutions, including wealth management, credit cards and personal loans.”
Citigroup said it was continuing “efforts to exit consumer banking.” Efforts to exit, and actually exiting, are two very different things. Citigroup has been saying that it plans to sell its consumer business in Russia since April of last year.
Notice that Citigroup’s statement of March 9 said nothing about exiting its corporate client business. That business has been very significant over the years and Citigroup brags about it as follows in its historical archive on its involvement in Russia, writing:
“In 2010, Citi acted as the joint lead manager of a USD 5.5 billion bond placement for Russia, the second largest dollar debt placement by an emerging market and Russia’s first placement in the global capital markets since 1998.
“In 2013, Citi marked a major milestone in our role as a leading international debt capital market intermediary: $100 billion in funds raised for Russian and CIS Eurobond issuers since participating in the debut placement in 1997.
“In 2014 Citi coordinated one of the major deals in that year with Phos Agro’s $440 million ECA-backed financing to fund construction of a new ammonia plant.
“In 2015 according to Dealogic, Citi was No.1 in cross-border M&A [Mergers and Acquisitions] in Russia. Citi advised on a number of Jumbo cross-border M&A deals, including Naspers’ $1.2 billion acquisition of a 50.5% stake in Avito, the largest technology M&A transaction ever in Russia and one of the largest Internet M&A transactions ever in EMEA. Citi played a key role in the one of the most significant cross-border M&A activities in Russia in 2016 — the sale of major stakes in Rosneft’s giant Vankor oil field to a group of Indian companies. This was not only the largest M&A deal of the year in Russia (totaling nearly USD 3 billion), it was also the largest ever acquisition by an Indian consortium outside of India.
“In 2017 Citi also invested in its private client infrastructure in Moscow by opening an upscale office to serve its wealthy clients on the 10th floor of Lotte Plaza Business Center on Novy Arbat.
“Citi is a leading provider of depositary receipt services and in 2017 Citi’s Issuer Services business, acting through Citibank, N.A., has been appointed by PJSC LUKOIL, one of the world’s largest oil and gas companies, as the successor depositary bank for its sponsored American Depositary Receipt (ADR) programs.”
As far as we can tell, Goldman Sachs and JPMorgan Chase did not release a formal statement on their websites regarding their plans to exit businesses in Russia, but simply opted to provide an emailed statement to reporters who were pressing them on the issue.
In an emailed statement to Reuters, Goldman Sachs and JPMorgan Chase said this:
“Goldman Sachs is winding down its business in Russia in compliance with regulatory and licensing requirements.”
JPMorgan Chase: “In compliance with directives by governments around the world, we have been actively unwinding Russian business and have not been pursuing any new business in Russia.”
However, JPMorgan’s website for its Russian operations continued to say this as of this morning:
“The bank offers a broad range of financial and banking services to legal entities, including treasury services, currency conversion operations, money market transactions, securities and derivatives trading, custody services and trade finance.
“The bank does not provide services to retail customers.”
JPMorgan Chase conducts its business in Russia under the name of J.P. Morgan Bank International. According to the Russian central bank, it has been registered there since October 26, 1993. The Russian central bank lists numerous licenses for the bank to conduct various businesses, including this one:
“License covering the following activities excluding for own company needs: development, manufacture, distribution of cryptographic solutions for information and telecommunication systems protected by cryptographic solutions; executing operations and providing services related to information encryption, technical maintenance of cryptographic tools and information and telecommunication systems protected by cryptographic solutions, No. 17696 H issued by Centre for Licensing, Certification and Protection of State Secrecy….”
Protecting Russian “State Secrecy” does not exactly sound like something President Biden’s administration would want to encourage at this particular time.
Goldman Sachs’ website says its physical presence in Russia began in 1998. It has been contractually hired, at least twice, to build Russia’s image and reputation among international investors. One contract was signed in 1992 between Goldman Sachs and the Boris Yeltsin administration. Another image-boosting contract was signed in 2013 under Putin. On February 4, 2013, Bloomberg News reported the following:
“Goldman Sachs Group Inc. (G) has been hired by the Russian government to burnish the nation’s image overseas and attract more institutional investors.
“The bank has signed a three-year agreement with the Economy Ministry and the Russian Direct Investment Fund to advise on issues such as communicating government decisions and setting up meetings with investors, according to Sergei Arsenyev, Goldman Sachs’s managing director of investment banking in Moscow…
“Goldman Sachs is one of 23 foreign and domestic banks selected to advise Russia on its 1 trillion-ruble ($33 billion) privatization program. Last year it helped advise OAO Sberbank, Russia’s largest lender, on a $5.2 billion equity sale.”
Sberbank, Russia’s largest bank, was trading for pennies on the London Stock Exchange last week, losing almost all of its market value since the Ukraine invasion, before the London Stock Exchange suspended trading in most Russian companies last week. The Moscow Stock Exchange has been closed to stock trading since Monday, February 28.
Goldman Sachs’ Russian website states that it “provides analytical research services for the Russian economy and Russian and foreign issuers. The Bank’s analytical research covers shares of 110 companies (99.5% of the MSCI index).”
Unfortunately for Goldman Sachs and its image building efforts, many of those Russian companies have seen their market value almost wiped out since Putin invaded Ukraine.