WSJ: Russia’s Backdoor to the Global Banking System Is Slamming Shut-Turkish lenders have become more cautious

The Wall Street Journal (WSJ) reports that Turkish companies and banks have become cautious in their trade with Russia following the US sanctions announcement. At the same time, Turkey is trying to get off the FATF’s Gray List, which means a country is problematic in the fight against money laundering.

The article titled “Russia’s back door to the global banking system is closing” reminded that after the Ukraine war that started in 2022, the Kremlin focused on doing business with the Gulf countries and European countries that maintained relations with Russia in order to avoid sanctions by Western countries.

The article argued that the US has recently become aggressive in its sanctions moves, which has begun to sever Russia’s ties with global banking activities.

16 Turkish companies were sanctioned

In a statement released by the US Department of Commerce last month, it was reported that 93 companies were placed on the sanctions list for providing support to Russia through their business activities.

Of these companies, 63 were based in Russia, 16 in Turkey, 8 in China, 4 in the United Arab Emirates (UAE) and two in Kyrgyzstan. The list also included one company each from India and South Korea.

Fund inflows from Russia to Turkey halted

“The climate in Turkey has changed as the US administration has pushed Ankara to mend its growing economic ties with Russia,” the analysis said, arguing that the situation in Turkey has changed since the sanctions list was announced.

“We’re having trouble getting paid,” Ömer Gencal, a financial adviser to some of these firms, told the WSJ.

“Recently, some banks have reported that they have stopped transferring funds from Russia to Turkey,” said Gencal, who was once director of HSBC Turkey’s asset management unit.

Trade with Russia falls 34 percent

According to data released by the Ministry of Trade on March 3, exports to Russia in February fell 34 percent compared to the same month last year to $670 million.

Russian Ambassador to Ankara Alexei Yerhov confirmed in February that there were “serious problems” in money transfers between Russian and Turkish banks. Yerhov said he was “in intensive talks with Turkish authorities about the refusal of some Turkish banks to make payments on behalf of Russian companies.”

UAE’s Emrates NBD closes several Russian accounts

On the other hand, the report said that one of the biggest changes following the US sanctions list took place at Emirates NBD, the Dubai-based banking giant owned by the UAE.

US officials, who declined to be identified, said the bank had been financing Russia’s large oil operations and had “set up a separate unit to serve Russians seeking a safe haven for their wealth” following the Ukraine war.

The WSJ reported that the bank has shut down the unit, stopped receiving ruble-denominated money transfers from Russia and closed a large number of accounts belonging to Russians, usually involving at least $5 million or more, or opened by organizations linked to sanctions.