Biden officials and Western allies committed Saturday to a series of tough new sanctions on Russia to tighten its financial system, including cutting off "selected" Russian banks from the international financial messaging system SWIFT, in retaliation for the Ukrainian invasion, they said. in a statement.

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Main points

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Russian banks will be fired from SWIFT to ensure they are "cut off from the international financial system and undermine their global operations," according to a statement from the US, European Union, France, Germany, Italy, United Kingdom, and Canada.

Russia's financial institutions that will be cut off are those already approved by the international community, says the German government - five Russian banks have been sanctioned, including the Sberbank-backed government and VTB, which make up almost half of Russia's banks. assets.

In addition, the Central Bank of Russia will be targeting measures to limit its ability to use its foreign exchange reserves, according to a statement, which did not elaborate on how this will be achieved.

The U.S. and its allies have agreed to reduce the sale of so-called “gold passports” that allow wealthy Russians to become citizens of Western countries and to move goods overseas.

They also say they are committed to imposing sanctions and other fines on many Russian actors and their family members and will establish an international team to acquire and establish assets for targeted companies and individuals.

CRUCIAL QUOTE

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"Punishment of Russia's central bank is likely to have a significant impact on the Russian economy and its banking system, similar to what we saw in 1991," Elina Ribakova, deputy chief economist at the Institute of International Finance, told Bloomberg. "This could lead to a sharp rise in bankruptcy and the rise of the dollar, with huge sales, liquidation - and, possibly, a complete collapse of Russia's financial system."

KEY BACKGROUND

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The downturn in the Central Bank of Russia will greatly affect Moscow, which has raised $ 630 billion - the fourth-largest in the world - about 15% of the dollar, with the aim of protecting itself from sanctions.

Western cooperatives aim to set up a major bank for the sale of foreign goods in those reserves in order to offset the sharp decline in the value of the ruble since the invasion of Ukraine.

The decision to expel Russia from SWIFT comes after growing support for a move to Europe on Saturday, Italy and Germany say they agree. SWIFT is a Belgian-based international messaging system that connects 11,000 financial institutions in more than 200 countries and regions, delivering 42 million messages per day last year linking transactions.

Russia will still be able to do banking operations with other countries without SWIFT, but it will be much harder and more expensive. There could also be negative consequences for Russia's key trading partners, including European countries, who may have difficulty paying for the Russian oil and gas relies on which they rely.

CONTRA

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The major American banks, including JPMorgan and Citigroup, wanted to persuade U.S. lawmakers and Biden officials not to block Moscow's access to SWIFT, reports Bloomberg.

They warned that the move could encourage the establishment of an alternative to SWIFT, reducing the strength of the dollar in the country's economy.

They also say that encouraging the use of other programs will make it harder for Western countries to track suspected financial transactions.

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