The US is joining the UK in freezing out big Russian banks

US president Joe Biden condemned Vladimir Putin’s attack on Ukraine today (Feb. 24) and announced a new round of sanctions intended to impose a “severe cost” on the Russian economy.

The actions are an escalation from Tuesday (Feb. 22), when the US imposed a first tranche of sanctions after Putin recognized the independence of two regions in eastern Ukraine. Whereas the earlier round targeted smaller banks, the forthcoming sanctions are directed at Russia’s two biggest banks, and are designed to inflict more economic pain. Biden said the US and its allies will also restrict exports from the country, and sanction wealthy oligarchs.

“We have purposely designed these sanctions to maximize a long-term impact on Russia and to minimize the impact on the United States and our allies,” Biden said in a speech at the White House.

Sberbank, VTB targeted by US sanctions

The new US sanctions target nearly 80% of all banking assets in Russia, according to the US Treasury Department. Russia’s largest bank, Sberbank, will be barred from processing any transactions in dollars, and will be cut off from the US financial system. The White House went one step further in targeting VTB, vowing to freeze any of its assets touching the US financial system and barring Americans from dealing with the bank.

This adds to already existing US sanctions on Vnesheconombank (VEB Bank), a development bank, and Promsvyazban, which were announced on Feb. 22.

The UK also said today it plans to freeze assets on major Russian banks including VTB, but didn’t mention Sberbank. The EU hasn’t yet announced sanctions on Russia’s bigger banks.

The US won’t sanction SWIFT for now

Despite growing calls from some international allies to cut off Russia’s access to SWIFT, a global payments system, the new US sanctions won’t do so for now.

“It is always an option, but right now that’s not the position that the rest of Europe wishes to take,” Biden said.

EU member states have been hesitant to cut off Russia from SWIFT because they fear European creditors would struggle to recover their money. More than 11,000 financial institutions across the world use SWIFT, and European banks have the most exposure to Russia.

“The sanctions we imposed exceed SWIFT. The sanctions we imposed exceed anything that’s ever been done,” Biden said.

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