Russia-US relations could be further soured by the case brought in Moscow against the Bank of New York (BoNY) for $22.5 billion in damages for alleged money-laundering in the 1990s, analysts warned yesterday – although the markets took a sanguine view.
Lawyers for the Russian Federal Customs Service (FCS) and the bank, headed by CEO Thomas Renyi, squared up to each other in the media. Maxim Smal, representing the customs service, said the bank had “committed violations of Russian law”. The bank said it had received no notification of the suit but said, judging by media reports, it was “totally without merit”.
Analysts were divided on the significance of the case over the longer term. Roland Nash, head of research at Renaissance Capital, told Emerging Markets that the case was “completely and utterly political”.
The case had to be seen “in the context of the EU-Russia meeting, the G8 summit events in Estonia and Russia’s relationship with the US”, Nash said. “This is a classic Russian tactic: irritating your enemy. It demonstrates that Russia is willing to push the envelope.”
Russia political analyst Christopher Granville at Trusted Sources in London was more sceptical. “It’s very, very unlikely that someone phoned the FCS from the Kremlin and said, ‘push this one to the front now, please’,” he said.
“The case certainly fits into Russian policy, of which president Putin is the chief exponent, of finding every possible fault in the US and Europe. This has become the standard response to finger-wagging at Russia from western leaders.
“But it is unlikely to be a substantial factor in US-Russia relations.”
Granville pointed out that Russia’s current anti-money laundering legislation was only adopted in 2002 when Russia joined the Financial Action Task Force on Money Laundering. He said that the case reinforced the long-standing argument that Russia should introduce a statute of limitations.
Eric de Poy, strategist at Alfa Bank in Moscow, said that markets had not been unduly disturbed by news of the suit. “Against the background of last year’s arguments about Russia’s accession to the WTO, and the prospect of the Democrats coming to power in the US and taking a tougher line with Russia, the suit is not good news for US-Russia relations.
“But I don’t think the Russian authorities are focusing on the US with this action. It has more to do with the fall-out from the Yukos affair and other actions against the oligarchs.”