In a surprising move, a court in the Moscow Region has ordered a freeze on funds belonging to two major U.S. banks: JP Morgan Chase and The Bank of New York Mellon. This freeze affects a staggering amount of nearly 93.5 billion rubles, which is about $1 billion!
Why Did This Happen?
This court order is the result of a case filed by Russia’s Prosecutor General last month. It’s part of an ongoing legal battle concerning the liquidation of a bank called the International Reserve Bank (MR Bank). This bank was a subsidiary of Sberbank, one of Russia’s largest banks. The Ukrainian authorities closed MR Bank back in early 2022, leading to a series of legal disputes over its funds.
When MR Bank was shut down, it had approximately $372 million deposited with JP Morgan and The Bank of New York. However, due to actions taken by Ukraine and financial restrictions imposed by the U.S., these funds became inaccessible to Sberbank and the Russian government.
What’s at Stake?
The Russian prosecutor is seeking to seize all the funds held by these U.S. banks in their Citibank Russia accounts. They are aiming to recover $372 million in damages for Sberbank, which they claim was wrongfully denied access to this money. The funds are stored in special ‘Type S’ accounts that Moscow created as a countermeasure against Western sanctions. These accounts are designed to prevent money from “unfriendly nations” from being moved out of Russia.
Interestingly, The Bank of New York has only about $66 million in its Type S accounts, but the total amount frozen from JP Morgan is reported to be around $919 million. This means the total amount impacted by the court’s decision is nearly $1 billion.
The Bigger Picture
This legal battle comes against the backdrop of heightened tensions between Russia and the West, particularly following the invasion of Ukraine. The freezing of these funds marks a significant escalation in the conflict between Russian authorities and U.S. financial institutions.
As the situation develops, many are left wondering what this could mean for international banking relations and the ongoing economic warfare between Russia and Western nations. Will the U.S. banks fight back? How will this affect the global financial landscape? Only time will tell.
Stay tuned as we keep an eye on this unfolding drama!
