The leaders of Europe, the UK, the US and Canada said in a joint statement that the exclusion of certain Russian banks from the SWIFT global financial messaging system was a response to President Putin’s decision to launch a military operation in Ukraine.
A group of Western allies declared support for Ukraine, accusing Russia of encroaching on fundamental international rules and norms, Sky News reports. The statement listed a series of financial sanctions that he said would be implemented “in the coming days.” In addition to cutting off several Russian banks from SWIFT, other sanctions include, in particular, “restrictive measures” preventing the Central Bank of Russia from “using its international reserves in a way that undermines the effect of our sanctions.”
Also, the declared “collective West” measures include actions against individuals and organizations that contribute to the military operation in Ukraine and the “harmful activities of the Russian government.” This includes limiting the sale of “golden passports” that allow wealthy Russians with ties to the Russian government to become citizens of Western countries with subsequent access to financial systems.
In addition, it announced the creation of a transatlantic task force to ensure the effectiveness of sanctions and declared “increased coordination against disinformation and other forms of hybrid warfare,” reports Sky News.
British Prime Minister Boris Johnson tweeted: “Tonight we took decisive action with our international partners to remove Russia from the global financial system, including the important first step to remove Russian banks from SWIFT.
According to European Commission President Ursula von der Leyen, cutting off Russian banks from SWIFT will prevent them from conducting most of their financial transactions around the world and will effectively block Russian exports and imports.
As Sky News explains, SWIFT – the Belgian-based Society for Worldwide Interbank Financial Telecommunications – transfers many billions of dollars daily to more than 11,000 banks and other financial institutions around the world.
The allies considered excluding Russia from this global system after Russia annexed Crimea in 2014.
According to analysts, among Western countries, the United States and Germany will lose the most from such a move, since their banks are the most frequent users of SWIFT in Russian banks.
Bank of England Governor Andrew Bailey told MPs last week that British banks have very limited access to Russia.
SWIFT said in a statement that they are preparing to implement the new measures in the coming days: “We are working with European authorities to find out details on the entities that will be affected by the new measures and we are preparing to implement them in accordance with legal instructions.”
Financial analysts are cautious, saying the move could shock global markets.
Edward Moya, senior market analyst at Oanda in New York, said: “This will be comparable to what happened with Iran (which was kicked out of Swift in 2012) and will have a devastating effect on their economy, and this will most likely bring a major shock to global financial markets when we open on Sunday evening.”
The analyst added: “This stock is going to be really hard to digest and will really get on the nerves of a lot of investors.”
Michael Farr, chief executive officer and founder of investment firm Farr, Miller & Washington, said: “This limits Russia’s ability to transact globally and cuts off its financial flows from most countries… The problem will be the inflation that occurs here, and to what extent it can actually slow down the European economy.”
Meanwhile, according to CNN, US and European officials have also discussed imposing sanctions on Russia’s central bank, two people familiar with the talks said, in an unprecedented move for an economy the size of Russia. No final decisions have been made, the sources say, and the structure of the sanctions being discussed remains unclear.
Hitting the central bank would strike at the very core of the Russian leadership’s decades-long effort to protect its economy from sanctions, CNN argues, pointing out that Russia has built the world’s fourth-largest foreign exchange reserves of more than $630 billion by abandoning dollar reserves. Both of these moves provide protection against US sanctions, even as the wide-ranging package of measures adopted this week has already disrupted the Russian economy.
Although the discussion of actions against the Russian central bank is described as being at an early stage, CNN reports, its consideration underscores the scale of the willingness to significantly tighten sanctions in Washington and Brussels.
A senior Biden administration official on the phone with reporters called Saturday’s joint move “an unprecedented act of coordinating global sanctions.” “We collectively plan to introduce measures to prevent Russia from using its central bank reserves to support its currency and thereby undermine the impact of our sanctions,” the official said.