The European Union, the United States and their allies have agreed to isolate a number of Russian banks from the main international payment system SWIFT. The assets of Russia’s central bank will also be frozen, limiting Russia’s ability to access its foreign reserves. Russia relies heavily on the SWIFT system for its main exports of oil and gas. The joint sanctions are the toughest measures yet imposed on Russia over its invasion of Ukraine. The SWIFT system, or the “Community for Global Financial Communications between Banks,” is a secure messaging system that makes rapid cross-border payments possible, enabling international trade to continue smoothly. The system, based in Belgium, facilitates transactions between more than From 11,000 banks and financial institutions around the world. SWIFT plays a pivotal role in supporting the global economy, but it does not have the authority to make sanctions decisions itself. A German official said the affected banks are “all those already subject to sanctions by the international community, as well as other institutions, if necessary”. The isolation of banks from SWIFT is a severe limitation of their work because almost all banks use the system and the procedures have been agreed upon by the US, UK, Europe and Canada. Ursula von der Leyen, the president of the European Commission, said the decision to paralyze the assets of Russia’s central bank would prevent the Kremlin from “using its money for war”. The European Union and its partners agreed to freeze the bank’s transactions and prevent it from liquidating its assets. She added that there will be a crackdown on the so-called with “golden passports” that “allow wealthy Russians linked to the Russian government to become citizens of our country and gain access to our financial systems.” British Prime Minister Boris Johnson said Britain had taken “decisive action,” tweeting: “We will continue to work together to ensure Putin pays the price for his aggression.” Responding to the announcement, Ukrainian Prime Minister Denys Shmyhal tweeted his appreciation for the sanctions, calling them “a real help during this difficult time”. European Union foreign ministers are due to meet on Sunday to coordinate military aid from member states to Ukraine, and to discuss humanitarian aid for the country and for those fleeing the conflict. Economy The Russian will be hit hard Analysis: Katie Prescott, business correspondent The exclusion of some Russian banks from the SWIFT system, used for trillions of dollars’ worth of transactions, will hit the Russian economy hard. In the words of the White House, it would make the country dependent on “the phone or the fax machine” for payments. This is just a slight exaggeration. There are workarounds for Swift but none are effective. Only one country was excluded from this system in the past, Iran, which led to the loss of 30% of its foreign trade. Choosing some Russian banks will ensure that sanctions have the maximum impact on Russia, while preventing a major impact on Europe. And it will be European companies are able to continue collecting money owed and buying Russian gas and oil. Other measures are just as powerful. And the restrictions on Russia’s central bank will prevent it from using its own currency to limit the impact of the sanctions. Russia is building up foreign currency support to protect its banks, but this new measure will significantly reduce available reserves. It may take some time for the effect of these measures to appear, but they reflect the intention of Western countries to move quickly.
Source: BBC Arabic
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