US allowed JPMorgan payment route for Russian grain export

The United States gave JPMorgan (NYSE:JPM) permission to process payments for agricultural exports via the Russian Agricultural Bank, but the arrangement was no substitute for reconnecting the bank to the SWIFT system, two Russian sources told Reuters.

Access to the SWIFT payment system is one of Russia’s main demands in negotiations over the future of the Black Sea grain export deal, which the United Nations says helps to tackle a global food crisis that has been aggravated by the Ukraine war.

The Kremlin has repeatedly warned the deal will not be renewed beyond May 18 unless the West removes obstacles to Russian grain and fertiliser exports, including the financing and insurance of exports.

A Russian source, who spoke on condition of anonymity, said the U.S. Office of Foreign Assets Control had allowed JPMorgan to process the transaction.
“JPMorgan received permission from OFAC to carry out payment for agricultural procure – but the process is difficult,” said the first Russian source.

A second Russian source said that JPMorgan and Russian Agricultural Bank, which is under U.S. and European Union sanctions, were both specifically given exemptions to execute a single transaction.

It involved grain and was denominated in U.S. dollars, according to the second Russian source. A third source also said the transaction was for grain.
Reuters could not ascertain who the exporter was or the destination of the supply.

The JPMorgan route was proposed as an alternative to reconnecting Russian Agricultural Bank (known as Rosselkhozbank) to SWIFT, but could be terminated at any time, the first Russian source said. “This cannot replace SWIFT,” the source said.

JPMorgan and Russian Agricultural Bank did not reply to requests for comment. The U.S. Treasury declined to comment.

Another source familiar with the transaction said the U.S. State Department and U.S. Treasury had asked JPMorgan to carry out the “very limited and highly monitored” transaction in relation to the export of agricultural materials, which occurred this month.

Russian Foreign Minister Sergei Lavrov on Tuesday told a briefing at the United Nations that one bank “kindly consented to finance one operation,” but that this was not an acceptable long-term solution. Lavrov did not name the bank.

LETTER TO PUTIN

Russia, usually the world’s top wheat exporter, signed a deal last July in which the United Nations agreed to try to remove any obstacles to its grain and fertiliser exports.

Those exports are not subject to Western sanctions imposed following the February 2022 invasion of Ukraine, but Moscow says restrictions on payments, logistics and insurance are a barrier to shipments.

One of Russia’s key demands is for the Russian Agricultural Bank to return to the SWIFT banking system.

Other demands include access to ports, the resumption of the Togliatti-Odesa ammonia pipeline, and the unblocking of assets and the accounts of Russian companies involved in food and fertiliser exports.

To try to save the Black Sea grain deal, U.N. Secretary-General Antonio Guterres gave Lavrov a letter addressed to President Vladimir Putin that outlines a way forward aimed at the improvement, extension and expansion of the Ukraine Black Sea grain deal, a U.N. spokesperson said.

The Kremlin said on Wednesday that the letter had been passed on via diplomatic channels.

“It is being considered,” Kremlin spokesman Dmitry Peskov said.

In Geneva, a Russian envoy said there had been no real progress on resolving the obstacles and that Rosselkhozbank had to be reconnected to SWIFT.

“What we need is not only case-by-case decisions, we need a systematic decision to reconnect Rosselkhozbank to SWIFT to make it possible for this bank to operate,” Russia’s envoy to the United Nations in Geneva, Gennady Gatilov, told reporters.
Source: Reuters