Kiev's Sanctions Against Russian Banks to Backfire on Ukrainian Economy

© AP Photo / Sergei ChuzavkovRadicals in front of a Sberbank branch in Kiev, putting up posters which read "Attention! This is a bank of an aggressor country. It will be closed. Urgently withdraw your money!", during a protest. Graffiti reads "Death to Russian banks." March 10, 2017
Radicals in front of a Sberbank branch in Kiev, putting up posters which read Attention! This is a bank of an aggressor country. It will be closed. Urgently withdraw your money!, during a protest. Graffiti reads Death to Russian banks. March 10, 2017 - Sputnik International
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All Russian state banks working in Ukraine are in talks on the potential sale of their businesses, the Ukrainian National Bank reported. According to political analyst and economist Alexander Dudchak, the situation will only deepen the crisis in Ukraine.

"We know for sure that all banks with Russian state-owned capital that are currently operating in Ukraine are negotiating a potential sale, and we, as a regulator of the banking market, believe that this is probably the best way to leave the Ukrainian market," National Bank of Ukraine Deputy Governor Kateryna Rozhkova told Inter TV channel Sunday.

Domino effect - Sputnik International
Kiev's Sanctions on Russian Banks May Trigger Irreversible Domino Effect
According to her, the reason is that it is impossible for those banks to develop in the Ukrainian market in the current circumstances.

The news came after President Petro Poroshenko approved on Thursday a proposal from the Ukrainian National Security and Defense Council to introduce one-year-long sanctions on subsidiaries of five Russian state banks, including Sberbank and VTB.

Earlier, some Russian banks already gave notice of their plans to sell their Ukrainian subsidiaries. In particular, VTB has already found a buyer for its BM Bank. The deal is expected to be closed by the end of March.

Moreover, Vneseconombank (VEB) has made significant progress in selling its Prominvestbank. Currently, the deal is in the final stage.

At the same time, Russia’s largest bank, Sberbank has not reported any similar plans. Last year, CEO Herman Gref said that Sberbank would not leave the Ukrainian market despite losses.

According to political analyst and economist Alexander Dudchak, Kiev’s sanctions against Russian banks are at least unreasonable.

"It’s hard to understand why Kiev wants Russian banks out of the market. This is unreasonable. Currently, the Ukrainian economy is not in the best condition and losses in any sector of the economy will have immediate consequences, especially in the banking sector," Dudchak told Radio Sputnik.

The expert noted that the sanctions will only add to the existing difficulties in the Ukrainian banking sector. In the past three years, over 90 banks have closed in Ukraine.

He suggested that in this situation Kiev cannot rely on support from Western partners.

"Western sanctions against Russia are still in place, and Kiev could say its actions are part of those sanctions. But its Western partners may respond that this is a bilateral issue between Ukraine and Russia. Currently, another problem is being made out of the blue in Ukraine. This is not in the interests of Ukraine, but in the interests of certain people," Dudchak concluded.

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