Daily Management Review

Russia To Face SWIFT Bans And Other Penalties For Ukraine Invasion


The United States and European nations voted on Saturday to impose the most harsh sanctions yet on Russia in response to Moscow's invasion of Ukraine. The latest sanctions target Russia's central bank reserves, with the goal of cutting Russian institutions off from a key global financial network.
The decision, taken as Ukrainian forces struggled to keep Russian forces out of Kiev and inhabitants hunkered down in subway tunnels, basements, and subterranean garages, has the potential to inflict considerably more damage on ordinary Russians than earlier rounds of sanctions.
“Putin embarked on a path aiming to destroy Ukraine, but what he is also doing, in fact, is destroying the future of his own country,” EU Commission President Ursula von der Leyen said.
Since Russia launched its invasion of Ukraine late last week, the European Union, the United States, the United Kingdom, and other allies have gradually tightened their sanctions.
Officials in the United States and the European Union have acknowledged that they are still working out the details of how to implement the further sanctions, and that they expect Russia's oil and natural gas exports to be excluded. According to authorities, the penalties placed on Russia may be among the worst ever imposed on a country. If fully implemented, the laws will have a significant negative impact on Russia's economy and severely limit its ability to import and sell goods.
The details of the latest sanctions on Russia were provided by the US and its European allies in a joint statement, in which they said that the latest sanctions were targeted to “hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”
The restrictions imposed on Russia's central bank are meant to limit its access to the Moscow's more than $600 billion in reserves, as well as Russia's ability to sustain the currency as its value declines owing to escalating Western sanctions.
US officials claimed that the measures announced on Saturday were intended to send the ruble into "free fall" and fuel rising inflation in the Russian economy.
The depreciation of the ruble would very likely lead to a surge in  inflation in Russia, hitting both ordinary Russians as well as the Russian elites who were the sanctions' primary aim. If the sanctions imposed on Saturday are as severe as described, the resulting economic turbulence may force Putin to face domestic political unrest.
Analysts predicted that Russians would intensify their bank runs and that government reserves would plunge as Russians rushed to sell their targeted currency in exchange for safer assets.
According to US officials, previously announced penalties have already had an effect on Russia, prompting the ruble to tumble to its lowest level against the dollar in history and the Russian stock market to have its worst week on record.
The decision announced on Saturday also includes the banning of major Russian banks from the SWIFT financial messaging system, which transmits tens of billions of dollars daily between more than 11,000 banks and other financial institutions worldwide.
Officials said the small print of the sanctions was still being ironed out as they attempted to mitigate the impact of the restrictions on other economies and European purchases of Russian energy.
When Russia attacked and annexed Ukraine's Crimea in 2014, as well as supporting rebel forces in eastern Ukraine, countries on both sides of the Atlantic considered the SWIFT option. Russia declared at the time that removing it from SWIFT would be equivalent to declaring war. The plan was discarded at the time by the allies, who were afterwards condemned for responding too weakly to Russia's aggression in 2014. Russia has endeavoured, with limited success, to develop its own financial transmission infrastructure since then.