The United States and its allies target the “fortress of Russia” with new sanctions, including the SWIFT ban
The United States and its allies moved on Saturday to block some Russian banks from accessing the international payment system SWIFT, in further punishment for Moscow as it continues its military assault on Ukraine.
The countries said in a joint statement that the measures, which will include limits on the international reserves of the Russian Central Bank, will be implemented in the coming days, and also pledged to take further measures.
“We will hold Russia to account and collectively ensure that this war is Putin’s strategic failure,” the leaders of the European Commission, France, Germany, Italy, Britain, Canada and the United States wrote.
“Even beyond the actions we are announcing today, we are ready to take further action to hold Russia accountable for its attack on Ukraine.”
The move comes after the United States and its allies imposed sanctions this week on major Russian banks as well as President Vladimir Putin, among others, as Moscow’s forces pushed deeper into the heart of Ukraine toward Kiev.
Catherine Nicholson explains what the latest EU sanctions aim to achieve
“As Russian forces launch their attack on Kiev and other Ukrainian cities, we are determined to continue to impose heavy costs on Russia. Costs that will further isolate Russia from the international financial system and our economies,” said Ursula von der Leyen, president of the Federation. The European Commission, the executive organ of the European Union.
In coordination with 🇺🇸🇫🇷🇩🇪🇮🇹🇨🇦🇬🇧 I will now propose new measures to EU leaders to strengthen our response to the Russian invasion of Ukraine and cripple Putin’s ability to finance his war machine. https://t.co/iU2waDzo9s
– Ursula von der Leyen (@vonderleyen) February 26, 2022 The measures aim to prevent Putin from using $630 billion in central bank foreign exchange reserves to invade Ukraine and defend the deteriorating ruble.
The exclusion of Russian banks from the SWIFT system – the world’s main international payments network – deals a blow to Russian trade and makes it difficult for Russian companies to do business.
“The Putin government is being pushed out of the international financial system,” said a senior administration official. SWIFT, or the “Society of Worldwide Interbank Financial Telecommunication,” is a secure messaging system that facilitates rapid cross-border payments, makes international trade flow smoothly and transfers trillions of dollars each year in what has become the primary mechanism for financing international trade.
Reporter Kethevane Gorjestani’s remarks after the SWIFT announcement
“We are communicating with European authorities to understand the details of the entities that will be subject to the new procedures and are preparing to comply with legal instructions,” Swift said in a statement.
The US official told reporters that if a bank separate from SWIFT wanted to make a payment with a bank outside Russia, it would likely need to use a telephone or fax machine. But the official said most banks around the world will likely halt all transactions with Russian banks that have been removed from the network.
The official said the US and its allies would finalize the list of banks to be cut off from the SWIFT system, adding that banks already subject to US and European sanctions would be the first to be considered.
On Thursday, US President Joe Biden announced sanctions aimed at limiting Russia’s ability to do business in dollars, euros, sterling and yen. Among the targets are five major Russian banks including state-backed Sberbank and VTB, the country’s largest lenders.
At the time, Biden said there was no agreement to take action on Swift — suggesting that the view of the otherwise dismissive allies has since turned sharply against Putin.
Von der Leyen said the new measures would prevent Russia from “using the war fund,” crippling its central bank’s assets, freezing its transactions and making it impossible for the central bank to liquidate its assets.
“We are disarming fortified Russia by taking this action,” the US official said, adding that other measures targeting the central bank may be completed by the end of the week.
What would happen if Russia was kicked out of the SWIFT system?
The United States imposed sanctions on the Central Bank of Iran in 2019 after attacks on oil facilities in Saudi Arabia. The Iran-aligned Houthi movement claimed responsibility for the attacks in Yemen.
At the time, then-US President Donald Trump said the steps, aimed at cutting off remaining Iranian funding sources, were “the highest sanctions ever imposed on any country.”
“Punish the central bank — it should be the biggest remaining hammer in the tool shed,” said Paul Marquardt, an attorney with Davis Polk in Washington where he advises clients on US sanctions.
The allies also pledged on Saturday to curb the sale of citizenship through so-called golden passports that some wealthy Russians use to obtain residency in Western countries and access their financial systems.
The partners will also launch a task force to “identify, hunt down and freeze the assets of Russian companies, sanctioned oligarchs, their yachts, mansions, and any illicit gains we can find and freeze.”
European Union foreign ministers are discussing the sanctions package in a virtual meeting on Sunday evening, the fourth time they meet in a week.
Edward Fishman, a fellow at the Atlantic Council who worked on Russian sanctions at the State Department during the Obama administration, said the measures announced Saturday are a significant escalation.
By signaling their joint commitment to these steps, the West is “giving Putin another opportunity to step back before unleashing the full scope of Russia’s economic arsenal,” Fishman said.