July 5, 2022

US, EU, UK block SWIFT to allow Russian central bank

WASHINGTON (AP) – The United States, the European Union and the United Kingdom on Saturday agreed to impose crippling sanctions on Russia’s financial sector, including access to the World Financial Organization and restrictions on it for the first time. Central Bank in retaliation for the invasion of Ukraine.

The move was announced jointly as part of a new round of sanctions, namely to “hold Russia accountable and ensure that this war (Russian President Vladimir) is a strategic defeat for Putin”. The central bank’s restrictions target the Kremlin’s more than $ 600 billion in reserves, limiting Russia’s ability to support the ruble amid Western sanctions.

The measures announced by the West as a whole since the beginning of the Russian invasion could impose severe sanctions on any country in modern times, and, if fully implemented as planned, would severely damage the Russian economy and significantly limit its ability to import. Export goods.

U.S. officials said Saturday’s actions were designed to send the ruble into a “free fall” and encourage rising inflation in the Russian economy. The previously announced sanctions have already had an impact on Russia, bringing its currency to its lowest level against the dollar in history and giving its stock market the worst week in history.

The collapse of the ruble will cause higher inflation, which could affect everyday Russians and not just the Russian elite who were the target of the original sanctions. This would be a significant extension of the economic pain.

Saturday’s move includes cutting off major Russian banks from the SWIFT financial news organization, which moves countless billions of dollars daily to more than 11,000 banks and other financial institutions around the world. The best axis of sanctions is still being washed over the weekend as they work to mitigate the impact of other economies and restrictions on European purchases of Russian energy, officials said.

Allies on both sides of the Atlantic considered the SWIFT option in 2014, when Russia invaded and annexed Ukraine’s Crimea and supported separatist forces in eastern Ukraine. Russia then declared that its expulsion from the SWIFT was tantamount to declaring war. The Allies – always criticized for their weak response to Russia’s invasion of 2014 – abandoned the idea. Since then Russia has tried to create its own financial transfer system, with limited success.

The United States has previously succeeded in expelling the Belgium-based Swift organization for Iran’s nuclear program. But Russia’s expulsion from the SWIFT could affect other economies, including the United States and its main ally, Germany.

A section cut off from the SWIFT announced by the West on Saturday allows for increased fines after Europe and the United States.

Announcing the move in Brussels, EU Commission Chairman Ursula von der Leyen said he was pushing the crowd to “freeze the assets of Russia’s central bank” so that its transactions could be frozen. He added that the cutting of several commercial banks from SWIFT would “ensure that these banks are disconnected from the international financial system and affect their ability to operate globally”.

“Cutting off the banks will prevent them from conducting most of their financial transactions globally and effectively prevent Russian exports and imports,” he added. “Putin started a path aimed at destroying Ukraine, but what he is doing is really destroying the future of his own country.”

Getting the EU on the panel to allow Russia through the SWIFT was a difficult task, as the EU trade with Russia was 80 billion euros, 10 times more than the United States, which was an early supporter of such measures.

Germany in particular stopped this move because it could hit them hard. But Foreign Minister Annalena Barbach said in a statement, “After Russia’s shameless attack … we are working hard to contain the parallel damage of disconnection from SWIFT (Russia) so that it strikes the right people. SWIFT’s goal, we need operational controls. “

As another step, the allies announced “a commitment to take steps to curb the sale of citizenship – the so-called gold passports – that will allow wealthy Russians affiliated with the Russian government to become citizens of our countries and access our financial institutions.”

The panel also announced this week that it would form a Trans-Atlantic task force to ensure that these and other sanctions on Russia are effectively enforced through information sharing and asset freezing.

“These new sanctions include the removal of several Russian banks from the SWIFT and the approval of Russia’s central bank, which will cause serious damage to the Russian economy and its banking system,” said Clay Lowry, executive vice president of the Institute of International Finance. “Details of how the new sanctions will affect energy are still emerging. We know that sanctions on its central bank will make it more difficult for Russia to export energy and other goods.”

Rachel Ziemba, a senior senior member of a new U.S. defense center, said, “Even without a complete SWIFT ban, these measures would still hurt Russia’s economy.

Ziemba says sanctions will hurt the Russian economy, depending on which banks are regulated and what measures are being taken to control the central bank’s ability to operate.

“Regardless, these kinds of sanctions, the removal of banks from the SWIFT, the control of the central bank, will all make it harder to get goods from Russia and increase the pressure on the financial markets.”

Meanwhile, the US embassy in Russia has warned Americans of several reports that non-Russian credit and debit cards will be rejected in Russia. In a tweet on Saturday night, the US embassy appeared to be concerned with the recent sanctions imposed on Russian banks following the Russian invasion of Ukraine. The embassy says US citizens in Russia should be prepared to pay for alternatives if their cards are rejected. It also reminded US citizens that the State Department is advising against traveling to Russia.

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Casert Report from Brussels. Associated Press writers Frank Jordan, Ken Sweet and Fatima Hussein contributed to the report.