Explained-How Western Sanctions Target Russia | world news

(Reuters) – The United States, Britain, Europe and Canada on Saturday announced new sanctions against Russia – including blocking some lenders’ access to the international payments system SWIFT – following of the Russian invasion of Ukraine on Thursday.

Below are details of the measures proposed so far:

Washington and its partners have begun rolling out what was widely considered to be one of the toughest sanctions measures: banning banks from accessing SWIFT – a measure that will prevent lenders from carrying out most of their financial transactions in the world and, according to the statement, will effectively curb Russian exports and imports.

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The measure, which will include restrictions on the central bank’s international reserves, will be implemented in the coming days, the nations said in a joint statement which also promised further measures.

It was not immediately clear which Russian banks would be removed from SWIFT, but Ursula von der Leyen, President of the European Commission, said the move would ensure those selected would be “disconnected from the international financial system” in a way that “would impair their ability to operate globally.”

SWIFT is used by over 11,000 financial institutions in over 200 countries.

The United States and Britain announced restrictions that, combined with previous sanctions, would effectively expel the vast majority of Russian banking assets from the two countries. New targets included Sberbank and VTB Bank, Russia’s two largest lenders.

U.S. banks must sever correspondent banking relationships — allowing banks to make payments to each other and move money around the world — with Russia’s biggest lender, Sberbank, within 30 days.

Washington officials have also used their strongest sanctioning tool, adding VTB, Otkritie, Novikombank and Sovcombank to the Specially Designated Nationals (SDN) list – effectively kicking them out of the US financial system, banning trade with Americans and freezing their American holdings.

EU leaders agreed to sanctions targeting 70% of Russia’s banking market and major state-owned companies, including in defence.

Russia’s major banks are deeply integrated into the global financial system and the sanctions will be felt far beyond its borders. Data from the Bank for International Settlements showed that European lenders hold the lion’s share of the roughly $120 billion in foreign bank exposure to Russia.

According to data from the Central Bank of Russia, total Russian foreign banking assets and liabilities amounted to $200.6 billion and $134.5 billion, respectively, with the US dollar’s share accounting for about 53% of the two. , compared to 76% to 81% two decades ago.

SOVEREIGN DEBT & CAPITAL MARKETS

Britain has announced that it will ban sales of Russian sovereign debt in London. Russia has issued £4.1 billion of sovereign debt to London since the start of 2020.

The next package of EU measures “will target the ability of the Russian state and government to access EU capital and financial markets and services, in order to limit the financing of escalating and aggressive policies”, said the block. It will ban EU investors from trading Russian government bonds.

Washington announced new restrictions on Russian sovereign debt transactions on Tuesday. Americans – already banned from investing directly in Russian sovereign debt – will be banned from buying it in the secondary market after March 1.

Even before the latest events, access to Russian bonds had become increasingly restricted.

US sanctions imposed in 2015 made future Russian dollar debt ineligible for many key investors and indices. In April 2021, President Joe Biden banned US investors from buying new Russian ruble bonds due to accusations of Russian election interference.

The restrictions have reduced Russia’s external debt by 33% since the start of 2014 – from $733 billion to $489 billion in the third quarter of 2021.

The US, EU and Britain have already imposed asset freezes, travel bans and other restrictions on Russian citizens.

Britain announced sanctions against more than 100 Russian individuals and entities, including an asset freeze and travel ban for Yelena Georgieva, chairwoman of the board of directors of Novikombank; Piotr Fradkov, president of Promsvyazbank; Denis Bortnikov, vice-president of the VTB; Kirill Shamalov, former son-in-law of President Vladimir Putin; and Yury Slyusar of United Aircraft.

Britain will also introduce legislation to limit the deposits Russian nationals can hold in UK bank accounts. The limit will be 50,000 pounds ($66,860) in UK banks.

Washington on Tuesday sanctioned Fradkov and Bortnikov, as well as Vladimir Kirienko, the son of a former prime minister.

On Thursday, Washington targeted others close to Putin, including Sergei Ivanov, CEO of Russian state-owned diamond mining company Alrosa; Andrey Patrushev, who held senior positions at Russia’s state-owned gas company Gazprom; and Ivan Sechin, who would be deputy head of a department of the energy company Rosneft.

Biden said on Thursday he would consider personal sanctions against Putin, a move that Moscow said would not personally harm the Russian president but would prove “politically destructive.”

The EU has already imposed sanctions on five people involved in a Russian parliamentary election in annexed Crimea last September, and said it would blacklist all lawmakers who voted to recognize two regions controlled by pro-separatists. Russians in eastern Ukraine, would freeze all assets they have in the EU and ban them from traveling to the bloc.

ENERGY CORPORATES & NORTH STREAM 2

The US and EU have already implemented sanctions against Russia’s energy and defense sectors, with state gas company Gazprom, its oil arm Gazpromneft and oil producers Lukoil, Rosneft and Surgutneftegaz facing various types of export/import and debt restrictions. breeding.

Sanctions could be tightened, with one possible option being to prevent companies from settling in US dollars.

Nord Stream 2, a recently completed pipeline between Russia and Germany, was awaiting regulatory approval from European and German authorities before Berlin put its certification on hold.

The United States on Wednesday imposed sanctions on the company in charge of the construction of the Russian gas pipeline Nord Stream 2.

The EU has pledged to introduce measures to strengthen Russia’s technological position in key areas – from high-tech components to cutting-edge software.

The U.S. Commerce Department said on Thursday it was implementing export controls that would severely restrict Russia’s access to semiconductors, computers, telecommunications, information security equipment, lasers and sensors it needs to maintain its military capabilities.

Similar measures were deployed during the Cold War, when sanctions kept the Soviet Union technologically backward and stunted economic growth.

(Reporting by Karin Strohecker and Catherine Belton in London, Michelle Price in New York, Katya Golubkova and Andrey Ostroukh in Moscow; Editing by Timothy Heritage and Leslie Adler)

Copyright 2022 Thomson Reuters.

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