WASHINGTON – The Biden administration and key European allies announced on Saturday that they would remove some Russian banks from the SWIFT financial communications system, essentially banning them from international transactions and imposing new restrictions on the Russian central bank to prevent it from using international reserves to undermine sanctions.
The actions agreed by the European Commission, Britain, Canada, France, Germany, Italy and the United States have been a significant escalation in efforts to impose significant economic costs on Russia for its invasion of Ukraine.
“Russia’s war is an attack on the basic international rules and norms that prevailed after the Second World War, which we are determined to defend,” the joint statement said. “We will hold Russia accountable and collectively ensure that this war is a strategic failure for” President Vladimir Putin.
Ursula von der Leyen, president of the European Commission, said that “the interruption of banks will stop them from conducting most of their financial transactions around the world and will effectively block Russian exports and imports.”
Ms von der Layen said the transatlantic coalition would also try to cripple Russia’s central bank, which is full of hard currency, by freezing its transactions and making it “impossible for the central bank to liquidate assets”.
The countries have also taken steps to put pressure on Russia’s elite. They said they would restrict the sale of so-called golden passports, which allow wealthy Russians linked to his government to become citizens of Western countries and gain access to their financial systems.
The announcement does not correspond to Russia’s complete suspension of SWIFT, which some officials see as a kind of nuclear option. Such a move would essentially separate Russia from much of the world’s financial system.
A focused approach also means that Russia, at least for now, will still be able to generate revenue from gas sales to Germany, Italy and other European countries.
Until Russian military attacks began last week, Germany and Italy have strongly opposed a total ban on deals with Russia that would cut about 40 percent of the Russian government’s revenue. But in recent days, their posture has begun to change.
On Saturday, German Chancellor Olaf Scholz announced that his government was approving the transfer of anti-tank weapons to the Ukrainian army, ending his insistence on providing only non-lethal aid, such as helmets.
At the same time, in a post on TwitterGerman Foreign Minister Analena Burbock and Economy Minister Robert Habeck acknowledged that the country’s government is now moving from opposing the SWIFT ban to a preference for a narrowly targeted ban.
“We are working hard to limit the side effects of disconnecting from #SWIFT so that it hits the right people,” they wrote. “What we need is a targeted and functional constraint on SWIFT.”
MEPs said they had been in long, sometimes tense discussions with US and British officials, who demanded an end as soon as the Russian invasion of Ukraine began.
But even some US officials had reservations about the complete partition of Russia. Among other concerns, they worried that this could strengthen the alternatives to the SWIFT system that Russia and China are developing. This could, over time, undermine the ability of the United States to track and control payments.
Ahead of Saturday’s announcement, US and EU leaders discussed how many and which Russian institutions to block, according to three European diplomats and another familiar with the issue. Officials discussed possible side effects and unintended consequences of targeted restrictions.
The announcement does not specify which banks will be cut off by SWIFT.
SWIFT, the Belgian communications service, officially known as the Global Interbank Financial Telecommunications Society, connects more than 11,000 financial institutions worldwide. It does not hold or transfer funds, but allows banks and financial institutions to warn each other of upcoming transactions.
For weeks, the Biden administration has publicly downplayed the idea of cutting Russia off the system, suggesting that while all options are on the table, such a move could create more problems to solve.
But behind the scenes, US officials have been pushing European allies to give Mr Putin an indication that Europe is moving towards greater economic isolation of Russia, part of a broader policy of restraint.
In addition, because SWIFT is a European organization, the United States allows European countries to take the lead. The only one-sided lever the United States could use would be to impose sanctions or threaten SWIFT itself if it continues to transmit messages to Russian institutions.
Some sanctions experts say the ban on SWIFT’s Russian financial institutions has been exaggerated as a tool to punish Russia, saying tough sanctions against the country’s banks will have the same effect. However, others say it will hit Russia’s financial sector and that choosing only a handful of banks to remove them from the communications system does not go far enough.
“A targeted break will not achieve what is needed,” said Marshall S. Billingsley, who was assistant finance minister for terrorist financing in the Trump administration. “They will simply reorganize the banking sector to push someone else forward. A much simpler approach is to simply separate SWIFT from all Russian financial institutions.
David E. Sanger and Alan Rapeport reported by Washington and Matina Stevis-Gridnef from Brussels.