Germany and its allies have decided to remove several Russian banks from the SWIFT system.

Germany and its allies have decided to remove several Russian banks from the SWIFT system.

FastNews reports that in punishment for Russia’s invasion of Ukraine, the United States, European Union, and the United Kingdom decided on Saturday to ban “selected” Russian institutions from the SWIFT global financial messaging system and impose “restrictive measures” on their central bank.

The measures were announced as part of a fresh wave of financial sanctions aimed at “holding Russia to account and collectively ensuring that this conflict is a strategic disaster for (Russian President Vladimir) Putin.” The central bank sanctions limitations target $600 billion in reserves held by the Kremlin.

Saturday’s move includes cutting key Russian banks out of the SWIFT financial system, which daily moves countless billions of dollars around more than 11,000 banks and other financial institutions around the world.

Allies on both sides of the Atlantic also considered the SWIFT option in 2014, when Russia invaded and annexed Ukraine’s Crimea and backed separatist forces in eastern Ukraine. Russia declared then that kicking it out of SWIFT would be equivalent to a declaration of war. The allies — criticized ever after for responding too weakly to Russia’s 2014 aggression — shelved the idea. Russia since then has tried to develop its own financial transfer system, with limited success.

The U.S. has succeeded before in persuading the Belgium-based SWIFT system to kick out a country — Iran, over its nuclear program. But kicking Russia out of SWIFT would also hurt other economies, including those of the U.S. and key ally Germany.

The disconnection from SWIFT announced by the West on Saturday is partial, leaving Europe and the United States room to escalate penalties further later.

Announcing the measures in Brussels, EU Commission President Ursula von der Leyen said would push the bloc also to “paralyze the assets of Russia’s Central bank” so that its transactions would be frozen. Cutting several commercial banks from SWIFT “will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally,” she added.

“Cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports,” she added.

Getting the EU on board for sanctioning Russia through SWIFT had been a tough process since EU trade with Russia amounted to 80 billion euros, about 10 times as much as the United States, which had been an early proponent of such measures.

Germany specifically had balked at the measure since it could hit them hard. But Foreign Minister Annalena Baerbock said in a statement that “after Russia’s shameless attack … we are working hard on limiting the collateral damage of decoupling (Russia) from SWIFT so that it hits the right people. What we need is a targeted, functional restrictions of SWIFT.”

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