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Western allies agree to expel some Russian banks from SWIFT payments system

The European Union, U.S. and other Western nations on Saturday announced they would cut off a “certain number of Russian banks” from the SWIFT international payments system, and impose restrictions on Russia’s Central Bank.

Why it matters: The measures will effectively cut Russia out of the world’s most important financial messaging system and undermine the Kremlin’s ability to use its central bank reserves to blunt the impact of other sanctions.

  • Ukrainian officials had demanded that Western allies cut Russia from SWIFT in response to the invasion and make the country a complete international and financial pariah.
  • Some European allies like Germany and Italy had previously expressed concern that disconnecting Russian banks’ access to SWIFT would cause collateral economic damage, but agreed to take the step after public pressure and days of intensive meetings.

Details: The commitments agreed to by the U.S., the EU, France, Germany, Italy, the U.K. and Canada on Saturday fall into five main categories, according to a joint statement.

  1. Disconnect select Russian banks from SWIFT, a move that a senior Biden administration official referred to as the “Iran model.”
  2. Undermine the Russian Central Bank’s ability to defend the ruble.
  3. Limit the sale of so-called “golden passports” that allow wealthy Russians to become citizens of Western countries and exploit their financial systems.
  4. Launch a trans-Atlantic task force to hunt down the assets of sanctioned Russians in order to ensure the penalties are enforced.
  5. Step up coordination of against Russian disinformation and other forms of hybrid warfare.

What they’re saying: “We will show that Russia’s supposed ‘sanctions-proofing’ of its economy is a myth. The $600 billion+ war chest of Russia’s foreign reserves is only powerful if Putin can use it,” a senior administration official told reporters.

  • “Without being able to buy the ruble from Western financial institutions, for example, Putin’s Central Bank will lose the ability to offset the impact of our sanctions. The ruble will fall even further. Inflation will spike and the Central Bank will be left defenseless,” the official added.
  • “We’re disarming ‘Fortress Russia’ by taking this action.”
  • The official said the list of Russian banks that will be cut off from SWIFT will be finalized by the EU, since the company is based in Belgium.

The big picture: The latest steps come on top of major sanctions already announced by the U.S. in coordination with the G7 last week, including sweeping export controls and a freeze on billions of dollars’ worth of Russian assets.

  • The EU, U.S. and U.K. separately announced on Friday that they would impose sanctions on Russian President Vladimir Putin and Foreign Minister Sergey Lavrov.
  • With the new sanctions enforcement task force, the West will “collectively hunt down the physical assets of sanctioned Russian companies and oligarchs — their yachts, jets, fancy cars and luxury homes,” the official said.
The flag of the European Union. right, and the flag of Ukraine. Photo: Marijan Murat/picture alliance via Getty Images

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