(28 February 2022 – Europe) The North Atlantic Treaty Organization (NATO) and allies have imposed severe sanctions upon Russia in response to its invasion of Ukraine, including banning major banks from SWIFT and cutting off the Russian central bank’s enormous foreign currency reserves.
11,000 banks globally utilise the SWIFT payments system, rendering Russian banks powerless as they are forced to “use a telephone or a fax machine” to execute cross border transactions.
The Belgian based Society for Worldwide Interbank Financial Telecommunication (SWIFT) co-operative affirmed it was implementing global measures led by the US, Britain and Western Europe targeting major Russian banks. The move is set to trigger a potential bank run as citizens rush to withdraw currency from disabled Banks despite the precipitous depreciation of the Russian Rouble currency.
Russia’s reserve bank had amassed US$630 billion in foreign currency reserves primarily to prop up the rouble and prevent it from falling further, however with few allowed to sell the currency to Russia’s central bank the currency is set to collapse.
In a joint statement, the leaders of the European Commission (EC), France, Germany, Italy, the United Kingdom (UK), Canada and the United States (US) further condemned Mr Putin’s invasion of Ukraine. As he escalated military action, sanctions would lift also.
“We commit to ensuring that selected Russian banks are removed from the SWIFT messaging system. This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally” the official statement confirmed.
“The foreign currency reserve war chest is impressive, but it’s only impressive if Russia can use those reserves. Without having the ability to defend its currency it will go into free-fall. We are disarming ‘Fortress Russia’ with these sanctions. Russia’s ‘sanctions proofing’ of its country is a myth” a White House spokesman said.