U.S. bank JPMorgan (JPM.N) this week stopped processing payments for the Russian Agricultural Bank, Russia said on Friday, as it demanded action, not promises, from Washington to help Russian grain and fertilizer reach global markets. The bank had handled some Russian grain export payments for the past few months with reassurances from Washington. However, that cooperation was “closed on Aug 2,” the Foreign Ministry said.
“JPMorgan cannot ignore the consequences of its actions and remain a partner in this humanitarian crisis,” the ministry said. The bank has fewer than 200 employees in Russia and is working to minimize its business with the country, the company said in a statement. The announcement follows Goldman Sachs’ decision to exit its Russia business. The firm also announced halting all consumer banking in Russia, Ukraine, and Belarus.
JPMorgan has been criticized for its role in the foreclosure crisis, when it securitized billions of dollars of mortgage loans and sold them to investors, including Fannie Mae and Freddie Mac, who then lost their money. The company has vowed to adhere to stricter guidelines in the future and has also promised to compensate some people who were hurt.
The company has been in a legal battle with some individuals harmed by its mortgage-backed securities. U.S. officials may bring new criminal charges against some of the firm’s former executives. The company has defended itself by saying that it did not know that fraud was occurring at the time of the sale.
While food and fertilizer exports are not subject to Western sanctions imposed after Moscow invaded Ukraine, Moscow claims restrictions on payments, logistics, and insurance pose obstacles to shipments. A source familiar with the situation told Reuters that U.S. State and Treasury Department officials had allowed JPMorgan to execute a limited transaction with Rosselkhozbank to remove the barriers this month.
That route is possible under an EU exemption to reconnect the bank to the SWIFT international payments system, allowing it only to process payment transactions related to the Black Sea grain deal. But the Foreign Ministry spokesperson reiterated that this solution is “not a panacea.” It could only provide temporary relief, she added. “An alternative option could be to create a subsidiary of the Russian Agricultural Bank that would connect to SWIFT, but this is not a perfect solution,” she said. “In the long run, it will be expensive and will not eliminate the problems.” The spokesperson also reiterated that Rosselkhozbank will continue to work with other international banks. She stressed that the reconnection of the bank to SWIFT is a fundamental condition for Russian agriculture to regain access to global markets. The bank will continue to explore all options for this purpose. “The most important thing is to restore full-scale cooperation with our partners, particularly those that have a huge demand for our products,” she said.