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German banks manoeuvre in Washington to temper Russia sanction risk

Reuters  |  FRANKFURT 

By Tom and O'Donnell

FRANKFURT (Reuters) - German banks are seeking to blunt any fresh U.S. sanctions against so they can continue existing business with Russian clients, according to an internal briefing paper prepared by a financial industry lobby group.

The risk of new restrictions on doing business with has risen since the won control of the New anti-measures could jeopardise funding for a between and

In response, lenders in Europe's largest economy have ratcheted up their lobbying efforts with U.S. lawmakers and government officials, warning that current proposals to sanction major Russian banks would be so expansive that they could disrupt global markets.

"In their current form, the proposed bills would no longer just target the Russian and oligarchs with close ties to Putin, but would effectively place an embargo against the Russian Federation," according to an extract from the document prepared by the

"International financial institutions which already operate in Russia would face new sanctions with massive business and compliance challenges."

The three-page paper calls for exceptions to be made which would allow "German banks and companies to complete business that cannot be unwound easily".

The document, dated Dec. 3 2018, outlines key points for bankers to raise with U.S. officials. It reflects the consensus view of the association, which represents 180 banks, including Deutsche Bank, and with units in Germany, such as Italy's

The 9.5 billion euro($10.78 billion) 2 project, which seeks to channel gas from Russia directly to under the Baltic Sea, is not mentioned in the document but its future lies at the heart of the renewed lobbying push.

"is the elephant in the room," said one person with direct knowledge of the matter.

The pipeline project, which is majority owned by Russian Gazprom, plans to tap lenders this year, a for 2 told He did not comment on the risk of new sanctions.

Russian agency quoted Nord Stream 2's chief saying it was in discussions with export credit agencies and wanted to raise around 6 billion euros.

But lenders will not want to run afoul of any U.S. sanctions.

German companies are already coming under pressure to distance themselves from Nord Stream. U.S. has said the pipeline will make "captive" to Russia and last month, the U.S. to Germany sent a letter to companies involved in Nord Stream warning that they could face sanctions if they stick with it.

declined to comment.


Last month, Germany's told companies his government would try to protect them from potentially "massive collateral damage" if levies further restrictions on Russia.

Almost five years of U.S. and European sanctions, imposed after Russia's 2014 annexation of Crimea, have already damaged economic ties between Germany and Russia.

Trade between the two countries was worth 57 billion euros in the first 11 months of last year, more than Germany's trade with and combined but a way off the 71 billion euros recorded in the same period of 2013, the year before a wave of sanctions was introduced.

German banks are still among the most to Russia with outstanding claims of nearly $7 billion in the third quarter of 2018, according to figures from the for International Settlements, but that is less than a third of the $22.5 billion recorded for the same period in 2013.

The newly elected U.S. is expected to move swiftly to bring new sanctions against

Republican Senator introduced a bill in August called the "Defending American Security from Kremlin Aggression Act", which proposes sanctions against big Russian banks and the country's

The German bankers' attempt to moderate such moves comes at a delicate time for the country's largest lender, It faces renewed scrutiny from over its most prominent customer - - and its own past dealings with Russia.

Deutsche declined to comment on its role in any lobbying

Martin Zielke, the of Commerzbank, Germany's second-largest listed bank, has met with Treasury officials and members of in recent months to argue for leniency, according to two Washington-based sources.

declined to comment. Both it and have subsidiaries in Russia with a combined workforce of more than 1,000 employees.

Further entreaties are expected to be made by top German in the run-up to April, when officials and bankers gather for the annual Spring meeting of the IMF and in DC.

Senator told in a telephone interview he planned to reintroduce a Russian sanctions bill in the coming months, or even sooner.

The Democrat, who this week called for a investigation of allegations of money laundering involving Deutsche Bank, said that sanctions should be designed to limit "to the extent possible, any ricochet on European banks and others."

"However, there is usually going to be some fallout and some repercussions for European banks given that there are these relationships," he said.

($1 = 0.8815 euros)

(Editing by Carmel Crimmins)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, February 08 2019. 22:01 IST