The United States is seeking to impose sanctions on Russia’s central bank

The United States is seeking to impose sanctions on Russia’s central bank

The United States is considering imposing sanctions on Russia’s central bank, a move that would prevent Moscow from accessing its foreign exchange reserves.

The action of the Biden administration would be the strictest measure imposed on Russia because of it invasion of Ukraineclaim people familiar with internal discussions.

Signs that Washington was preparing to dramatically increase pressure on Russia emerged when Germany reversed course from its previous resistance. cutting off Moscow from Swiftglobal interbank payment system.

Germany has said it supports imposing “targeted and functional” restrictions on Russia over Swift, its foreign and economy ministers said on Saturday.

“We are urgently working on how to limit the collateral damage of separation from Swift by affecting the right people,” said German Foreign Minister Annalena Baerbock and Economy Minister Robert Habeck.

The comments mark a shift from the day before, when German leaders said they were against suspending Russia from Swift. However, there is growing pressure on European countries that oppose such a move because bloody images are coming out of Ukraine.

The White House and the U.S. Federal Reserve declined to comment on the central bank option, Bloomberg was the first to report. The United States has previously imposed sanctions only on the central banks of Iran, Venezuela and North Korea.

One of the ways in which the United States would take action against the Russian central bank would be to put it on the list of specially designated citizens of the American treasury. That would ban American entities from doing business with the bank and could lead to foreign institutions that do business with it facing sanctions.

The senior executive of US banking said imposing sanctions on the central bank was one of many options the Biden administration had discussed with leading US financial groups in recent weeks. The executive said it was unclear whether the administration intended to take such a step, but added that U.S. officials wanted to make sure banks were ready for the possibility.

Josh Lipsky, a former IMF adviser who is now in the think tank of the Atlantic Council, said imposing sanctions on Russia’s central bank would be “an extremely significant and damaging move for the Russian economy”.

“The G20 central bank has never been sanctioned before. This is not Iran. This is not Venezuela. So excluding their central bank from the international financial system, or at least the dollar and euro economy, is potentially a huge destabilizing move, ”Lipsky said.

Edward Fishman, a former U.S. official now working at the Center for the New American Security, said it would be a “devastating blow” to the Russian economy that would obscure the significance of the Swift ban.

“If you were to add the Russian central bank to the SDN list, that would be the only most influential sanction you could apply to Russia, and you could do that with one stroke of the pen,” he said. “That would make a significant portion of their foreign exchange reserves unusable overnight.”

A ban would prohibit U.S. entities from doing any business with the central bank. That would mean that everyone in the world would be “adept at transferring funds on behalf of the Russian central bank,” Fishman explained.

In the EU, talks on the Swift payment system are accelerating as part of a third package of sanctions, in addition to two sets of fines announced earlier this week.

EU foreign ministers are scheduled to meet Sunday night via video conference to discuss further measures to support Ukraine and possible additional sanctions. Ministers could also discuss cutting Russia off from Swift, although the decision is more likely to be early next week, an EU diplomat said familiar with the discussions.

EU resistance to ousting Russian banks from Swift has eroded, and Italy has said it will not stand in the way of such a move. Italian Prime Minister Mario Draghi told Ukrainian President Volodymyr Zelensky in a call Saturday that Rome would fully support the EU’s work on sanctions against Russia, “including those involving Swift.”

After speaking with Zelensky on Saturday, British Prime Minister Boris Johnson, who strongly advocated a move against Moscow, said both leaders “welcome the increased readiness to take steps to exclude Russia from Swift”.

Cutting off Russian banks from Swift would make it more difficult for Russians to conduct cross-border transactions, increasing pressure on the country’s financial system. The finance ministers ordered the European Commission and the European Central Bank to undertake technical work on the mechanics and consequences of Russia’s suspension.

Swift, a Belgian company owned by more than 2,000 banks and financial institutions, provides secure messaging services for trillions of dollars worth of payments between banks. He found himself in the spotlight during international crises, especially because of Iran’s nuclear program. In 2012 and again in 2018, he was forced to close Iranian banks that were the target of sanctions.

Some analysts believe that severing banks’ ties with Swift would cause serious operational problems, rather than as exhaustive as more targeted sanctions, such as those imposed by the United States on Russian banks in recent days.

But Ukraine caught Swift as part of its campaign for tougher action against Russia, which led to intense pressure on major economies, including the US and Germany, to oust Russia from the system.

One of the key concerns in Europe is how to ensure that the abolition of Russian banks from Swift does not impair the ability of countries to pay for gas imports from the country.

German officials have said the Swift debate avoids a deeper question from Western allies: whether they want to continue buying Russian fuel. About 40 percent of the gas imported into Europe comes from Russia. German officials say suspending Moscow from Swift could cause economic chaos unless Western governments are willing to boycott Russian energy.

Some G7 officials fear that removing Russia from Swift would accelerate Russia’s efforts, and China’s in particular, to create competitive payment systems that do not use the US dollar.

Additional reporting by Gary Silverman in New York, Jim Pickard in London, Valentine Pop in Brussels and Silvia Sciorilli Borrelli in Milan

Source link

Leave a Reply