* Gazprombank moved $6.9 billion to central bank in March
* It and other banks cut deposits in foreign banks
* Moves coincided with Western sanctions, more threatened
By Jason Bush
MOSCOW, April 24 (Reuters) - Russia's third biggest bank moved almost $7 billion to the central bank as tension over Ukraine rose in March and joined others in slashing its deposits in foreign banks where they could be frozen if more international sanctions are imposed.
The movement of funds by Gazprombank, revealed in data published by the central bank, means that at the beginning of April its foreign currency on deposit at the central bank dwarfed those of other major Russian banks.
It was "quite a unique event", Maxim Osadchy, banking analyst at Moscow-based BKF Bank, said, noting Gazprombank hardly ever used that account for foreign currency operations.
"This could show that Gazprombank was using the foreign currency correspondent account at the central bank as a sort of haven from sanctions."
Gazprombank declined to comment.
The currency move was part of wider actions by Russian banks to repatriate funds to Russia, lowering their exposure to the risks of possible wider Western sanctions over the Ukraine crisis, analysts said.
Monthly accounts available on the central bank website show that during March, Gazprombank increased the foreign currency held at its correspondent account with the central bank from zero to 248 billion roubles ($6.9 billion).
This represented the bulk of the $8 billion that Russian banks added to such central bank accounts as a whole, Raiffeisenbank analysts calculated.
It was not clear where other banks put their money or why they did not use their central bank accounts. Banks' total forex investments at home and abroad fell by around $24.5 billion, central bank data shows, suggesting that much of the funds went to meet large public demand for dollars and euros.
Only one Russian bank has so far been targeted by U.S. sanctions, but some U.S. senators have recently called for sanctions against both state gas producer Gazprom, the bank's founder and minority shareholder, and other major banks.
The U.S. government has warned that more sanctions may follow within days if Russia does not take steps to defuse the situation in eastern Ukraine.
The accounting data show that from the beginning of 2007 until last month Gazprombank had only used the central bank account for significant forex operations at the height of the global financial crisis from January to March 2009.
At that time it deposited 90 billion roubles in foreign currency for a short period. Between September 2009 and January 2010, two deposits worth just 1,000 roubles each were paid back a month later.
During March, Gazprombank also greatly reduced its foreign currency holdings at foreign banks - part of an inflow of funds into Russia that has been masked by massive net capital outflows overall.
Funds held by Gazprombank in correspondent accounts with foreign banks fell to 118 billion roubles from 181 billion, while up to three month deposits and loans with foreign banks were slashed to zero from 183 billion roubles.
Other Russian banks also reduced their funds held at foreign banks in March, although there was not an equivalent increase in money they held at the central bank. In total Russian banks cut the foreign currency they held in foreign banks to $79 billion from $100 billion, central bank data showed.
"It's possibly a defence against possible sanctions," said Anastasia Baikova, head analyst at Raiffeisenbank in Moscow.
VTB, Russia's second largest bank, saw the biggest reduction, reducing its forex investments and accounts in foreign banks by some 240 billion roubles.
VTB press office said the bank does not comment on its monthly accounting data, calling the local standards used to prepare it "unrepresentative" as they do not reflect all the bank's foreign subsidiaries.
Sberbank, the largest bank, saw a relatively modest reduction of 25 billion roubles.
The United States and European Union have imposed sanctions on several Russian and Ukrainian individuals and Washington has also sanctioned Bank Rossiya, owned by businessmen it regards as close to Russian President Vladimir Putin.
"Considering the continuing instability in Ukraine (as a consequence, the risk of tougher U.S. and EU sanctions, including against Russian banks), we don't exclude that the transfer of funds out of non-resident banks will continue," Raiffeisenbank said in a report analysing the data.
Gazprombank, with around 3.9 trillion roubles in assets, is 49.6 percent owned by Gazfond, a pension fund affiliated with Gazprom, 35.5 percent owned by Gazprom itself, and 10.2 percent owned by state development bank VEB.
Bank Rossiya until recently had links to Gazprombank, as the asset management company that managed Gazfond was partly owned by an insurance company, SOGAZ, owned by Bank Rossiya.
SOGAZ sold its remaining 35-percent shareholding in the asset management company to Gazfond last month.
(Editing by Philippa Fletcher)