Western leaders to impose sanctions on Russia’s central bank and cut some Swift lenders

The United States and its Western allies will impose sanctions on Russia’s central bank and remove some of the country’s lenders from the Swift global payment system, in their toughest response yet to the invasion of Ukraine.

In a joint statement, the US, UK, Canada, France, Germany, Italy and the European Commission said they would stop Russia’s central bank from using its internal reserves to undermine broader penalties.

“[Vladimir] Putin’s government is being kicked out of the international financial system,” said a senior US official, who added that the measures would send the Russian currency “into a tailspin”.

The executives said they would expel some Russian banks from Swift, ensuring they are “disconnected from the international financial system” and harming their ability to operate. They also vowed to crack down on “golden passports” that allow wealthy Russians to buy citizenship, and impose sanctions on officials and elites close to the government.

The joint action is an escalation in the West’s response to Russia’s invasion of Ukraine. “We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin,” the leaders said in their joint statement.

The Biden administration official said Putin had turned Russia into a “global economic and financial pariah” with his invasion of Ukraine.

“What we are committed to doing here is disarming the central bank,” the official said of the central bank sanctions, adding that the action would affect all of the roughly $630 billion in reserves. change of institution.

“Without being able to buy the ruble from Western financial institutions. . . Putin’s central bank will lose the ability to offset the impact of our sanctions,” he said. “The ruble will fall even further, inflation will skyrocket and the central bank will be left helpless.”

In a separate statement, European Commission President Ursula von der Leyen said she would propose to European leaders to “cripple the assets of the Russian central bank” in order to freeze its transactions and prevent it from liquidating its assets.

Josh Lipsky, director of the Atlantic Council Center for Geoeconomics who previously worked at the IMF, said before the actions that hitting the central bank would be an “extraordinarily large and damaging move” for Russia’s economy.

“A G20 central bank has never been sanctioned before. It’s not Iran. It’s not Venezuela,” Lipsky said.

Edward Fishman, a former US official currently at the Center for a New American Security, said it could deal a “devastating blow” to Russia’s economy that would overshadow the significance of a ban on Swift. The United States has only sanctioned the central banks of Iran, Venezuela and North Korea.

A U.S. official declined to say whether Washington would sanction the central bank by adding it to the Treasury’s list of “specially designated nationals,” which Fishman described as “the most impactful sanction you could apply to Russia, and you could do it with the stroke of a pen”.

“It would render a significant portion of their foreign exchange reserves unusable overnight,” Fishman said.

The move would ban US entities from dealing with the central bank, which would mean everyone would be “cautious about transferring assets in the name of the Russian central bank”, he said.

The joint statement did not list the banks that will be kicked out of the Swift messaging system.

Ukrainian President Volodymyr Zelensky had pleaded with Western capitals to use access to Swift to pressure Russia. Removing Swift’s banks will make it harder for Russians to transact across borders, increasing pressure on the country’s financial system.

Swift, a Belgium-based cooperative owned by more than 2,000 banks and financial institutions, provides secure messaging services for billions of dollars in bank-to-bank payments.

It said in a statement on Saturday that it was “engaging with European authorities to understand the details of the entities that will be subject to the new measures, and . . . preparing to comply with legal instructions”.

The company has found itself in the spotlight during international crises, including over Iran’s nuclear program. In 2012 and 2018, he was pushed to shut down sanctioned Iranian banks. The US official said the new ruling against Russia was the “Iranian model”.

The goal of the Swift-related sanctions will be to avoid undermining the mechanisms for Western economies to buy energy from Russia.

The allies have not finalized the mechanism, but they will prevent some energy-focused banks from being kicked out or use product definitions within the Swift system to allow energy-related transactions to continue.

The leaders said additional measures would include limiting the sale of “golden passports” that “enable wealthy Russians connected to the Russian government to become citizens of our countries and access our financial systems.”

They also pledged to launch a “transatlantic task force” in the coming week to track down and freeze the assets of sanctioned individuals and companies.

It will also lead to sanctions and other enforcement actions against other Russian officials and elites close to the Kremlin, as well as their families and enablers, the statement said.

“We will also engage other governments and work to detect and disrupt the movement of ill-gotten gains, and to prevent these individuals from hiding their assets in jurisdictions around the world.”

To follow Demetri Sebastopulo, Colby Smith and Sam Fleming on Twitter

Video: A missile hits a building in Kiev

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