This article was originally published by Radio Free Europe/Radio Liberty and is reprinted with permission.
A group of Western nations led by the United States, the European Union, and the United Kingdom have agreed to block access for “selected” Russian banks to the SWIFT financial system and impose “restrictive” measures against Russia’s central bank to punish the Kremlin for its unprovoked invasion of Ukraine earlier this week.
A senior U.S. administration official warned the measures — among the toughest announced yet against Russia for its aggression against Ukraine — will pierce Russia’s financial defenses built over the past eight years and send the Russian ruble into “freefall.”
The sanctions were announced jointly late on February 26 by the United States and the EU and come as Russia’s attack against Ukraine extends into its fourth day.
EU Commission President Ursula von der Leyen said the sanctions “will ensure that these [Russian] banks are disconnected from the international financial system and harm their ability to operate globally.”
In their joint statement announcing the measures, the group of nations — which also includes France, Germany, Italy, and Canada — did not say which Russian banks will be selected, but von der Leyen said more could be added.
“We commit to ensuring that a certain number of Russian banks are removed from SWIFT,” von der Leyen said in a statement.
“This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally,” she added.
The group of nations will leave some Russian banks connected to SWIFT in order to pay for Russian oil and gas exports. Russia is the biggest supplier of energy to Europe.
SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a secure system that helps enable cross-border payments, allowing international trade to flow more smoothly. The system is used in more than 200 countries.
Russian banks could try to use other payment networks and systems, including messaging apps or e-mail, via countries not involved in the sanctions, but that would be far less secure and inefficient. It would also force transaction costs to skyrocket.
Von der Leyen said the measures aimed at Russia’s central bank would paralyze its assets and making it impossible for the central bank to liquidate its assets.
A senior U.S. official said the moves would prevent the Russian central bank from selling its $630 billion in gold and foreign currency reserves to Western countries and is likely to send the ruble into a “freefall.” The impact will be felt immediately, the official said.
“We are collectively planning to impose measures to ensure Russia cannot use its central bank reserves to support its currency and thereby undermine the impact of our sanctions. This will show that Russia’s supposed sanctions-proofing of its economy is a myth,” the official said.
The Russian central bank reportedly sold $5 billion in foreign currency reserves on February 24 to protect the ruble, which dropped sharply to a record low on news of the invasion.
A sharp decline in the ruble will make imported goods more expensive and cause inflation to spike, potentially sending the economy into contraction.
EU foreign ministers will discuss the sanctions package at a virtual meeting on February 27.
The group said it will quickly form a transatlantic task force to ensure that these and other sanctions on Russia are implemented effectively through information sharing and asset freezes.
Ukraine had been calling for the West to disconnect Russia from SWIFT and impose other thought sanctions in order to pressure the Kremlin to end its hostilities.
In a tweet, Ukraine Prime Minister Denys Shmygal expressed gratitude for the decision.
“Thanks to our friends…for the commitment to remove several Russian banks from SWIFT” and for “the paralysis of the assets of the central bank of Russia,” he said.
