In a significant step, on Saturday, February 26, 2022, the United States and leaders of the European Commission, France, Germany, Italy, the United Kingdom, and Canada announced additional sanctions against key Russian institutions and banks. The weekend announcement indicated that the specific sanctions will be released in the next few days.

The United States and Allies explained that the additional measures are designed to “ensure that this war is a strategic failure for Putin.”

The United States-Allies agreement includes several significant actions:

First, the United States and the Allies committed to remove selected Russian banks from the SWIFT messaging system.  The announcement was a surprise action given that the Allies had rejected adoption of such a significant measure. The specific identity of the Russian banks targeted for removal from SWIFT was not yet announced.

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) system is a voluntary cooperative among banks and financial institutions that includes a large messaging network to send and receive information to execute fund transfers. 

The SWIFT system consists of more than 11,000 financial institutions in more than 200 countries.  On average, 42 million messages are sent and received each day.

Second, the United States and Allies committed to impose restrictive measures to prevent the Russian Central Bank from deploying its international reserves to circumvent or reduce the impact of sanctions measures against Russia.  The United States and Allies refrained from taking steps to freeze Russia’s reserves located in the major Western economies, which would impose severe and significant steps on the Russian economy. Russia’s central bank maintains approximately $640 billion in foreign exchange reserves.

Third, the United States and Allies committed to act against entities and individuals that facilitate the war in Ukraine.  In this regard, the United States and Allies agreed to limit the sale of “golden passports,” that allows wealthy Russian to immigrate to other countries and gain access to foreign financial systems.

Fourth, the United States and Allies plan to launch a transatlantic task force to ensure effective implementation of financial sanctions to identify and freeze the assets of sanctioned individuals and companies within the United States and Allies’ jurisdictions. As part of this effort, the United States and Allies committed to employing sanctions and other financial enforcement measures on additional Russian officials and elites close to the Russian government, as well as their families and enablers that facilitate movement and hiding of assets in various jurisdictions.

The new measures will add to the overall sanctions and export controls measures announced last week. The Russian stock market and ruble fell to low levels in response to the initial round of sanctions and export controls.  The new measures will impose additional burdens on Russia’s financial system and economy.

Russia’s central bank already took steps to intervene in the foreign exchange market to stabilize its financial market. If the United States and Allies freeze Russia’s central bank foreign reserves, the result could be devastating to the Russian economy.