The White House on Saturday announced that the United States and allies will kick certain Russian banks out of a major international banking system, a significant step in a bid to cripple the Russian economy in response to the country’s invasion of Ukraine.
The Biden administration and European allies agreed to cut Russia out of access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a rapid shift from just days ago when it appeared such a move was unlikely in the near future.
The U.S. and European nations also committed to imposing measures to prevent the Russian Central Bank from using its reserves to undermine sanctions and boost the ruble.
The announcement came via a joint statement from the leaders of the U.S., the European Commission, France, Germany, Italy, the United Kingdom and Canada. The leaders called Russian attacks on Ukraine “an assault on fundamental international rules and norms that have prevailed since the Second World War, which we are committed to defending.”
“We stand with the Ukrainian people in this dark hour. Even beyond the measures we are announcing today, we are prepared to take further measures to hold Russia to account for its attack on Ukraine,” they said in the statement.
Banks across the world use SWIFT to finalize transactions and transfers. Cutting Russia off from SWIFT would make it incredibly difficult for its banks to operate efficiently but could also wreak economic havoc for European nations that depend on Russian oil and natural gas exports.
If a Russian bank that’s been removed from SWIFT wants to make a transaction with a bank located outside of Russia, it will need to use the telephone or a fax machine, a senior administration official told reporters.
Biden on Thursday had indicated kicking Russia out of SWIFT was not part of the initial rounds of sanctions because not all European allies were on board with the measure. But as fighting intensified in Ukraine in recent days and Russia moved close to the capital of Kyiv, pressure grew for Western nations to offer a tougher response.
Additional measures announced on Saturday included limitations on the use of so-called golden passports that allow wealthy Russians with connections to the Kremlin to become citizens of other countries and access their financial systems.
The U.S. and its allies also said they would announce a task force to ensure the effective implementation of the coordinated sanctions being imposed on Russia.
The Biden administration and European allies have unveiled multiple rounds of sanctions in response to the Russian invasion of Ukraine, which began late Wednesday night. The U.S. has sanctioned multiple Russian financial institutions to freeze their U.S. assets as well as a list of several Russian oligarchs.
The White House on Friday announced additional sanctions against Russian President Vladimir Putin and a dozen of his top advisers, freezing any of their assets in the U.S.
Imposing sanctions on Russia’s central bank could crush the country’s economy and financial sector, depending on how severely Western allies restrict its assets.
With limited access to its foreign reserves, Russia could face serious challenges keeping targeted banks afloat and mitigating the economic impact of sanctions. A total freeze on foreign reserves would likely devastate the Russian economy, cause a domestic financial crisis and leave the ruble worthless.
The U.S. has targeted the central banks of only North Korea, Iran and Venezuela with sanctions — nations with limited leverage over the global economy. Taking action against the Russian central bank could pose its own economic risks for the U.S. and allies. The Biden administration and western allies have been wary of any sanctions that could limit access to Russian petroleum or natural gas exports.
“Our calculus is we have two choices,” the senior administration official told reporters on Saturday. “Either we continue to ratchet costs higher to make this a strategic failure for President Putin, or the alternative, which is unacceptable, and that would be allowing unchecked aggression in the core of Europe.”
Sylvan Lane contributed.
Updated at 6:27 p.m.