The US and its allies moved on Saturday to deny certain Russian banks access to the SWIFT international payment system, as part of a broader retaliation for Moscow’s military assault on Ukraine.
The sanctions, which include restrictions on the Russian central bank’s international reserves, will be imposed in the coming days, according to the nations’ joint statement, which also promised more action.
The leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada, and the United States wrote, “We will hold Russia accountable and collectively ensure that this conflict is a strategic disaster for Putin.”
“We are willing to take additional measures to hold Russia accountable for its war on Ukraine, even beyond the measures we are announcing today,” they continued.
The move comes after the US and its allies imposed sanctions this week on key Russian banks and Russian President Vladimir Putin, among others, as Moscow’s soldiers advanced into Ukraine’s heartland toward Kyiv.
“We are determined to continue exacting tremendous costs on Russia as Russian soldiers launch an assault on Kyiv and other Ukrainian cities. Costs that would isolate Russia even further from the international financial system and our economy, “President of the European Commission, Ursula von der Leyen, stated the European Union’s executive.
The moves are intended to prevent Putin from spending $630 billion in central bank foreign currency reserves in the invasion of Ukraine, as well as to preserve the rouble from further depreciation.
Russian banks being kicked out of the SWIFT system, the world’s largest international payments network, hurts Russian trade and makes it more difficult for Russian businesses to do business.
A senior US administration official said, “Putin’s regime is being booted out of the world banking system.”
The “Society for Worldwide Interbank Financial Telecommunication,” or SWIFT, is a secure communications system that allows for quick cross-border payments and smooth international trade.
It has become the primary source of funding for international trade. The system is used to move trillions of dollars each year.
If a bank cut off from SWIFT wishes to make a payment with a bank outside of Russia, the official told reporters, it will most likely have to utilise a phone or fax machine. However, according to the official, most banks throughout the world would likely halt all transactions with Russian institutions that have been pulled from the network.
The US and its partners will finalise the list of institutions that would be shut off from SWIFT, according to the person, who added that firms already subject to US and European sanctions will be prioritised.
On Thursday, US President Joe Biden issued penalties aimed at limiting Russia’s ability to transact in dollars, euros, pounds, and yen. Five major Russian banks were targeted, including state-backed Sberbank and VTB, the country’s two largest lenders.
The latest restrictions announced on Saturday will also prevent Russia from “using its war chest,” according to von der Leyen, by paralysing the central bank’s assets, freezing its transactions, and preventing the central bank from liquidating its assets.
“By taking this move, we’re disarming fortress Russia,” the official said, adding that more actions against the central bank might be finalised over the weekend.
On Saturday, the allies also agreed to ban the selling of citizenship through so-called golden passports, which are used by some wealthy Russians to secure residency and access to Western financial systems.