US, allies impose new sanctions including SWIFT ban on Russian financial system

Actions are aimed at preventing Putin from using $630b in central bank reserves

The headquarters of Bank Rossii, Russia's central bank, in Moscow. The United States, Britain, Europe and Canada on Saturday moved to block certain Russian banks’ access to the SWIFT international payment system.

Washington/Brussels: The United States, Britain, Europe and Canada on Saturday moved to block certain Russian banks’ access to the SWIFT international payment system in further punishment of Moscow as it continues its assault against Ukraine.

The measures, which will also include restrictions on the Russian central bank’s international reserves, will be implemented in the coming days, the nations said in a joint statement

“We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin,” the leaders of the European Commission, France, Germany, Italy, Great Britain, Canada and the United States wrote.

“Even beyond the measures we are announcing today, we are prepared to take further measures to hold Russia to account for its attack on Ukraine,” they added.

The move comes after the United States and its allies slapped sanctions this week on major Russian banks as well as on Russian President Vladimir Putin himself, among others, as Moscow’s forces pushed into the heart of Ukraine toward Kyiv.

Restriction on funds

The actions are aimed at preventing Putin from using $630 billion in central bank foreign currency reserves in the invasion of Ukraine and to defend a plunging rouble.

Cutting Russian banks out of the SWIFT system - the world’s main international payments network - deals a blow to Russian trade and makes it harder for Russian companies to do business.

“Putin’s government is getting kicked off the international financial system,” a senior US administration official said.

SWIFT, or the “Society for Worldwide Interbank Financial Telecommunication”, is a secure messaging system that facilitates rapid cross-border payments, making international trade flow smoothly.

It has become the principal mechanism for financing international trade. Each year, trillions of dollars are transferred using the system.

The US official told reporters that if one of the banks cut off from SWIFT wants to make a payment with a bank outside of Russia, it will likely need to use a phone or fax machine.

Selective ban

The United States and its allies will finalize the list of banks that will by cut off from SWIFT, the official said, adding that banks already under U.S. and European sanctions would be the first ones considered.

Biden announced sanctions on Thursday that were aimed at limiting Russia’s ability to do business in dollars, euros, pounds and yen. Among the targets were state-backed Sberbank and VTB, Russia’s two largest lenders.

The new measures announced on Saturday will also stop Russia from “using its war chest,” paralysing the assets of its central bank, freezing its transactions and making it impossible for the central bank to liquidate its assets, von der Leyen said.

“We’re disarming fortress Russia by taking this action,” the US official said, adding that other actions targeting the central bank could be finalized over the weekend.

The United States slapped sanctions on Iran’s central bank in 2019 following attacks on oil facilities in Saudi Arabia that were claimed by the Iran-aligned Houthi movement in Yemen.

EU foreign ministers will discuss the sanctions package at a virtual meeting on Sunday evening, the fourth time they come together in a week.

In Britain, Prime Minister Boris Johnson said the allies’ “decisive action” would shut Russia out of the global financial system.

“We will keep working together to ensure Putin pays the price for his aggression,” he wrote on Twitter.

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