WASHINGTON (AP) – The United States and European countries agreed on Saturday to impose the most potentially severe financial sanctions on Russia for its relentless invasion of Ukraine, pursuing central bank reserves that underlie the Russian economy and distracting some Russian banks from vital global financial network.
The decision, announced at a time when Ukrainian forces fought on Saturday to keep Russian forces from the Ukrainian capital and residents hidden in subway tunnels, basements and underground garages, could spread the pain of Western retaliation for President Vladimir Putin’s invasion of ordinary Russians than before. rounds of fines.
“Putin is on a path that aims to destroy Ukraine, but what he is also doing is, in effect, destroying the future of his country,” said EU Commission President Ursula von der Leyen.
The European Union, the United States, Britain and other allies have steadily stepped up their sanctions since Russia launched an invasion late last week.
While US and European officials have made it clear that they are still working on mechanisms to implement the latest measures and intend to preserve oil and natural gas exports from Russia, in general sanctions could potentially be among the toughest levied on the country in the newest time. If these measures are implemented in full, as planned, these measures will cause serious damage to the Russian economy and significantly limit its ability to import and export goods.
The United States and European allies have announced these steps in a joint statement as part of a new round of financial sanctions aimed at “bringing Russia to justice and collectively ensuring that this war is a strategic failure for Putin.”
The central bank’s restrictions are aimed at accessing more than $ 600 billion in the Kremlin’s reserves and are designed to block Russia’s ability to support the ruble when it falls in value amid tightening Western sanctions.
U.S. officials said Saturday’s steps were prepared to send the ruble into “free fall” and boost inflation in the Russian economy.
The depreciation of the ruble is likely to lead to higher inflation, which will hurt ordinary Russians, not just Russian elites, who were the targets of the initial sanctions. As a result of economic disruptions, if Saturday’s measures are as harsh as described, Putin may face political unrest at home.
Analysts have predicted an increase in bank raids by Russians and a drop in state reserves as Russians try to sell their target currency for safer assets.
U.S. officials have noted that previously announced sanctions have already affected Russia, bringing its currency to its lowest level against the dollar in history and making its stock market the worst week in history.
Saturday’s move also involves excluding key Russian banks from the SWIFT financial messaging system, which moves countless billions of dollars daily to more than 11,000 banks and other financial institutions around the world.
The fine print of sanctions was still smoothed over the weekend, officials said, as they work to limit the impact of restrictions on other economies and European purchases of Russian energy.
Allies on both sides of the Atlantic also considered a SWIFT option in 2014, when Russia invaded and annexed Ukrainian Crimea and supported separatist forces in eastern Ukraine. Russia then stated that expelling her from SWIFT would be tantamount to declaring war. The allies, who have so far been criticized for reacting too weakly to Russia’s aggression in 2014, then postponed the idea. Since then, Russia has tried to develop its own system of financial transfers, but with limited success.
Earlier, the United States managed to persuade the Belgian SWIFT system to expel the country – Iran – for its nuclear program. But Russia’s expulsion from SWIFT could also hurt other economies, including the United States and Germany’s key allies.
Only in rare cases has the West and its allies fired a full volley across the country with available financial weapons. Iran and North Korea, the two previous targets, had a much smaller role in the world economy, while Russia with its vast oil reserves plays a much larger role in world trade, and some parts of Europe depend on natural gas.
The disconnection from SWIFT, announced by the West on Saturday, is partial, leaving Europe and the United States room to further increase fines. Officials said they had not fully decided which banks would be shut down.
Announcing the measures in Brussels, EU Commission President von der Leyen said she would push the bloc to “paralyze Russia’s Central Bank assets” so that its transactions would be frozen. The exclusion of several commercial banks from SWIFT “will ensure the disconnection of these banks from the international financial system and damage their ability to operate globally,” she added.
“The opening of banks will prevent them from conducting most of their financial operations around the world and effectively block Russian exports and imports,” she added.
The EU’s accession to sanctions against Russia through SWIFT was a difficult process, as the EU’s trade with Russia amounted to 80 billion euros, which is about 10 times more than the United States, which previously advocated such measures.
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Germany in particular has refused this measure, as it could hit them hard. But Foreign Minister Annalena Burbock said in a statement that “after the shameless attack of Russia … we are working hard to limit the collateral damage from the secession (Russia) from SWIFT so that it gets to the right people. We need targeted SWIFT functional limitations. ”
As another measure, the Allies announced their commitment to “take measures to restrict the sale of citizenship – so-called gold passports – which will allow wealthy Russians affiliated with the Russian government to become citizens of our countries and gain access to our financial systems.”
The group also announced the creation of a transatlantic task force this week to ensure the effective implementation of these and other sanctions against Russia through information sharing and asset freezes.
“These new sanctions, which include removing several Russian banks from SWIFT and imposing sanctions on Russia’s central bank, could seriously damage the Russian economy and its banking system,” said Clay Lowry, executive vice president of the Institute of International Finance. “Although details of how the new sanctions affect energy are still emerging, we know that sanctions against its central bank will complicate Russia’s exports of energy and other goods.”
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Rachel Ziemba, an adjunct senior researcher at the Center for the New American Security, said that even without a complete SWIFT ban, “these measures will still be painful for Russia’s economy. They are stepping up measures already taken earlier this week, making transactions more complex and difficult. ”
Ziemba says how much sanctions will be imposed on the Russian economy will depend on which banks are restricted and what measures are taken to limit the central bank’s ability to operate.
“Regardless of the fact that such an escalation of sanctions, the removal of banks from SWIFT, the restriction of the Central Bank, all this will make it more difficult to obtain goods from Russia and increase pressure on the financial market.”
Meanwhile, the US Embassy in Russia warns Americans of numerous reports of refusal to use non-Russian credit and debit cards in Russia. On Twitter on Saturday night, the US embassy said the problem was apparently related to recent sanctions against Russian banks following Russia’s invasion of Ukraine. The embassy says that US citizens in Russia need to prepare alternative means of payment in case of refusal of cards. It also reminded US citizens that the State Department does not advise going to Russia.
Casert reported from Brussels and Svit from New York. Associated Press authors Frank Jordan, Fatima Hussein and Josh Boak contributed to this report.
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