West unleashes SWIFT bans, more crushing sanctions on Russia | national news

The decision, announced as Ukrainian forces fought on Saturday to hold back Russian forces from the Ukrainian capital and residents sheltered in metro tunnels, basements and underground garages, has the potential to spread the pain of Western retaliation. for President Vladimir Putin’s invasion to ordinary Russians far more than in the past. series of penalties.

“Putin has embarked on a path to destroy Ukraine, but what he is also doing, in fact, is destroying the future of his own country,” European Commission President Ursula von der Leyen said. .

The European Union, United States, United Kingdom and other allies have steadily stepped up the intensity of their sanctions since Russia launched the invasion late last week.

While US and EU officials have made it clear that they are still working on mechanisms to implement the latest measures and intend to spare Russia’s oil and natural gas exports, the sanctions in total could potentially represent some of the harshest imposed on a nation in modern times. If fully implemented as planned, the measures will severely damage the Russian economy and significantly limit its ability to import and export goods.

US and European allies announced the moves in a joint statement as part of a new round of financial sanctions designed to “hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”

Central bank restrictions target access to the more than $600 billion in reserves the Kremlin has and aim to block Russia’s ability to prop up the ruble as it plunges in value amid tougher sanctions Western.

U.S. officials said Saturday’s moves were aimed at sending the ruble into a “free fall” and fueling soaring inflation in the Russian economy.

The falling ruble would likely drive up inflation, which would hurt ordinary Russians and not just the Russian elites who were the target of the original sanctions. The resulting economic disruption, if Saturday’s measures are as harsh as portrayed, could leave Putin facing political unrest at home.

Analysts predicted an intensification of Russian runs on banks and a decline in government reserves as Russians scrambled to sell their target currency for safer assets.

U.S. officials noted that previously announced sanctions had already impacted Russia, dragging its currency to its lowest level against the dollar in history and giving its stock market the worst week on record.

Saturday’s decision also includes the removal of major Russian banks from the SWIFT financial messaging system, which moves countless billions of dollars daily at more than 11,000 banks and other financial institutions around the world.

The fine print of the sanctions was still being ironed out over the weekend, officials said, as they work to limit the impact of the restrictions on other economies and European energy purchases Russian.

Allies on both sides of the Atlantic also considered the SWIFT option in 2014, when Russia invaded and annexed Ukrainian Crimea and backed separatist forces in eastern Ukraine. Russia then declared that kicking him out of SWIFT would amount to a declaration of war. The allies – since criticized for responding too weakly to Russia’s aggression in 2014 – then abandoned the idea. Since then, Russia has tried to develop its own financial transfer system, with limited success.

The United States has already succeeded in persuading the Belgian-based SWIFT system to expel a country – Iran, because of its nuclear program. But kicking Russia out of SWIFT could also hurt other economies, including those of the United States and key ally Germany.

Rarely have the West and its allies fired a full salvo of their available financial weapons at a country. Iran and North Korea, two previous targets, had much smaller roles in the world economy, while Russia, with its huge oil reserves, plays a much larger role in world trade, and some parts of Europe depend on its natural gas.

The disconnection of SWIFT announced by the West on Saturday is partial, leaving Europe and the United States room to escalate sanctions later. Officials said they had not fully defined which banks would be closed.

Announcing the measures in Brussels, European Commission President von der Leyen said she would push the bloc to “cripple the assets of the Central Bank of Russia” so that its transactions are frozen. Cutting several commercial banks from SWIFT “will ensure that these banks are disconnected from the international financial system and will harm their ability to operate globally”, she added.

“Closing the banks will prevent them from carrying out most of their financial transactions around the world and will effectively block Russian exports and imports,” she added.

Getting the EU on board to sanction Russia via SWIFT was a difficult process as EU trade with Russia amounted to 80 billion euros, around 10 times more than the US, which had been one of the first proponents of such measures.

Germany had specifically balked at the measure because it could hit them hard. But Foreign Minister Annalena Baerbock said in a statement that “after Russia’s brazen attack…we are working hard to limit the collateral damage of SWIFT’s decoupling (from Russia) so that it affects the right people. What we need are targeted functional restrictions from SWIFT.”

As a further step, the allies announced a commitment “to take steps to limit the sale of citizenship – the so-called golden passports – which allow wealthy Russians linked to the Russian government to become citizens of our countries and to have access to our financial systems.

The group also announced the formation this week of a transatlantic task force to ensure these and other sanctions against Russia are implemented effectively through information sharing and asset freezing.

“These new sanctions, which include the withdrawal of several Russian banks from SWIFT and the sanction of the Russian central bank, are likely to cause serious damage to the Russian economy and its banking system,” said Clay Lowery, vice-president Executive Chairman of the Institute of International Finance. “While details of how the new sanctions affect energy are still emerging, we know that sanctions against its central bank will make it harder for Russia to export energy and other materials. firsts.”

Rachel Ziemba, associate principal researcher at the Center for a New American Security, said that even without a complete ban on SWIFT, “these measures will still be painful for the Russian economy. They reinforce the measures already taken at the start of the week by making transactions more complicated and difficult. »

Ziemba says the pain the sanctions will inflict on the Russian economy will depend on which banks will be restricted and what steps are taken to restrict the central bank’s ability to operate.

“Anyway, this kind of increasing sanctions, removing banks from SWIFT, restricting the Central Bank, all of this will make it more difficult to get raw materials from Russia and will increase the pressure on the market. financial.”

Meanwhile, the U.S. Embassy in Russia is alerting Americans to several reports of non-Russian credit and debit cards being declined in Russia. In a tweet on Saturday evening, the US Embassy said the issue appears to be related to recent sanctions imposed on Russian banks following the Russian invasion of Ukraine. The embassy said US citizens in Russia should be prepared with alternative payment methods if cards are declined. He also reminded US citizens that the State Department advises against travel to Russia.

Casert reported from Brussels and Sweet from New York. Associated Press writers Frank Jordan, Fatima Hussein and Josh Boak contributed to this report.