U.S. And Allies To Remove Some Russian Banks From SWIFT, Sanction Central Bank

Feb 26, 2022, 07:06pm

Russian banks will be cut off from the international financial-messaging system in response to the invasion of Ukraine, according to the Biden administration and Western allies.

According to the statement from the U.S., European Union, France, Germany, Italy, the Russian banks will be expelled from the international financial system to make them disconnected from the international financial system.

The Russian financial institutions that will be disconnected are those that have already been sanctioned by the international community, according to the German government.

According to the statement, the Russian Central Bank will be targeted with measures to restrict its ability to use its international reserves.

The U.S. and its allies agreed to limit the sale ofgolden passports that allow wealthy Russians to become citizens of Western countries and move assets overseas.

They said they would establish an international task force to find and freeze the assets of targeted companies and individuals, and that they were committed to levying sanctions and other financial penalties on more Russian elites and their family members.

Elina Ribakova, deputy chief economist at the Institute of International, said that the Russian economy is likely to be affected by the central bank sanctions.

Moscow has $630 million in reserves that include gold, bonds, and deposits. Moscow needs the reserves to stop the depreciation of its currency since it invaded Ukraine, according to the Wall Street Journal. The decision to kick Russia out of SWIFT came after Italy and Germany said they were in favor. 42 million messages per day were delivered last year by the international messaging system known as SWIFT, which connects 11,000 financial institutions in more than 200 countries and territories. Russia would still be able to conduct banking transactions with other countries, but it would be more labor intensive and expensive. It could have negative consequences for key trading partners of Russia, including European countries, which could have difficulties paying for the imports of Russian oil and gas.

Contra

Major U.S. banks had tried to convince U.S. lawmakers and the Biden administration not to restrict Moscow's access to SWIFT. They warned that the measure could encourage the development of an alternative to the dollar. Encouraging the use of alternative systems would make it difficult for Western countries to track suspect financial transactions.

Tangent

Iran is the only other country that has not been allowed to use the financial messaging service, because of international sanctions over the country's nuclear program.

Wall Street Counsels Washington against kicking Russia off of the international financial organization.

What is it? This banking system could be used to punish Russia for invading Ukraine.