U.S., ALLIES DELIVER SWIFT KICK TO PUTIN
Group agrees to mostly block Russian access to global financial system and slap sanctions on central bank
WASHINGTON — The United States, European Union and United Kingdom on Saturday agreed to put in place crippling sanctions on the Russian financial sector, including a block on its access to the global financial system and, for the first time, restrictions on its central bank in retaliation for its invasion of Ukraine.
The measures were announced jointly as part of a new round of financial sanctions meant to “hold Russia to account and collectively ensure that this war is a strategic failure for (Russian President Vladimir) Putin.” The central bank restrictions target the more than $600 billion in reserves that the Kremlin has at its disposal, meant to limit Russia’s ability to support the ruble amid tightening Western sanctions.
Cumulatively the steps announced by the West since Russia began the invasion would potentially amount to some of the toughest sanctions on any country in modern times, and if fully carried out as planned, would severely damage the Russian economy and markedly constrain its ability to import and export goods.
U.S. officials said Saturday’s steps were framed to send the ruble into “free fall” and promote soaring inflation in the Russian economy. They noted that 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 on record.
The decline of the ruble would likely cause higher inflation, which would hurt everyday Russians and not just the Russian elites who were the targets of the original sanctions. It would be a substantial widening of the economic pain.
Saturday’s move includes cutting key Russian banks out of the SWIFT financial messaging system, which daily moves countless billions of dollars around 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 purchases of Russian energy.
Allies on both sides of the Atlantic also considered the SWIFT option in 2014, when Russia invaded and annexed Ukraine’s Crimea and backed separatist forces in eastern Ukraine. Russia declared then that kicking it out of SWIFT would be equivalent to a declaration of war. The allies — criticized ever after for responding too weakly to Russia’s 2014 aggression — shelved the idea. Russia since then has tried to develop its own financial transfer system, with limited success.
The U.S. has succeeded before in persuading the Belgium-based SWIFT system to kick out a country — Iran, over its nuclear program. But kicking Russia out of SWIFT could also hurt other economies, including those of the U.S. and key ally Germany.
The disconnection from SWIFT announced by the West on Saturday is partial, leaving Europe and the United States room to escalate penalties further later.
Getting the EU on board for sanctioning Russia through SWIFT had been a tough process since EU trade with Russia amounted to 80 billion euros, about 10 times as much as the United States, which had been an early proponent of such measures.
Germany specifically had balked at the measure since it could hit them hard. But Foreign Minister Annalena Baerbock said in a statement that “after Russia’s shameless attack ... we are working hard on limiting the collateral damage of decoupling (Russia) from SWIFT so that it hits the right people.’’