Sanctions against Russia: The EU isolates the main Russian banks with the disconnection of the SWIFT payment platform | International

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The EU has ordered this Wednesday to disconnect seven Russian banking entities from the international interbank payment platform SWIFT, in retaliation for the military invasion of Ukraine orchestrated by Moscow. The financial short circuit, considered one of the last sanctioning resources due to its striking power and the possible rebound effect on the Twenty-seven, was slow to take shape due to the reluctance of several community partners, including Germany. The claw of the community block will be remotely controlled and, for the moment, of limited scope: it will affect 25% of the Russian banking sector. But the financial sanctions are piling up and already affect 80% of the banks in this country.

The banks hit are Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank, Vnesheconombank (VEB) and VTB Bank, all directly or indirectly linked to supporting the war in Ukraine, according to the European Commission. Brussels was also seeking to hit the giants Sberbank and Gazprombank, respectively the first and third largest entities in the country, but has finally decided not to do so in order to safeguard the possibility of maintaining European payments dedicated to the import of Russian gas and oil, which are managed mainly through these two entities.

The EU, which has coordinated the measure with the rest of the G-7 partners, was considering surgical and selective disconnections, so as not to affect payments for imported fuel, but the SWIFT platform does not technically allow this option, according to a senior community source. . "Basically, we have had to leave Sberbank and Gazprombank out for that," says this source, adding that both entities, in any case, are already included in previous sanctioning rounds, and that the power of SWIFT's retaliation adds to all the traction accumulated by the EU to date.

The financial penalties imposed by the EU against Russia since 2014 —when Crimea was illegally annexed— and intensified in the last week to unprecedented limits —after the military invasion of Ukraine ordered by Russian President Vladimir Putin— already affect 80 % of the Russian banking sector, and Brussels does not rule out the possibility of continuing to tighten the economic turnstile, expanding the scope of the disconnection from SWIFT or in other areas.

“With the speed of light, the EU has adopted three waves of strong sanctions against Russia's financial system, its high-tech industries and its corrupt elite. This is the largest package of sanctions in the history of our Union”, the president of the European Commission, Ursula von der Leyen, highlighted this Wednesday in a statement. "Today's decision to disconnect major Russian banks from the SWIFT network will send another very clear signal to Putin and the Kremlin."

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The seven selected entities will be gradually unplugged from the system, over a period of 10 days, to give SWIFT and other operators time to make the necessary adjustments. The measure implies that these banks will not be able to use the aforementioned international payment system, whose world share amounts to 50% of global transactions and which includes some 11,000 financial organizations from 200 countries in more than 200 countries. The creation of the SWIFT system (Society for Worldwide Interbank Financial Telecommunication) dates back to 1973 and the platform is controlled by a company whose headquarters are located in Belgium, and which will be in charge of technically executing the European regulation approved this Wednesday that entails the expulsion of the system.

The EU trusts that any interbank movement that Russian entities intend to carry out from now on will become in practice such an uncomfortable, burdensome and risky issue in terms of security, that it turns these entities into something similar to financial pariahs. The movement also represents a serious internal setback in Russia, since the SWIFT platform is also used for 70% of transactions within the country. Brussels is aware that the sanctioned banks could start using other interbank payment platforms, such as the alternative launched by China, but understands that this trend will take time to set in, so the short-term impact would remain.

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