The Western nations have expelled certain Russian banks from the SWIFT payment system days after Putin's full-scale invasion of Ukraine. The expulsion decision aims to pressure Moscow to withdraw its troops from Ukraine, a call which Western leaders have been endorsing for days. The move will have definitely have an impact on Moscow, but it would still have leverage as Russia's Central Bank has so far not come under sanctions. However, top US officials have maintained that such a move is under consideration.
The US, EU Commission, France, Germany, Italy, UK and Canada announced the expulsion on Saturday evening and pledged to collectively ensure that this war is a strategic failure for Vladimir Putin.
Impact on Russia
The West also pledged restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of West's sanctions," and restricting the sale of "golden passports" that allow Russian oligarchs to avoid the brunt of sanctions already levied, reported CNN.
A senior Biden administration official said that expelling Russian banks from the SWIFT network, a high-security network that connects thousands of financial institutions around the world, would make transactions with "de-SWIFTed" banks all but impossible, prompting most banks to "simply stop transacting altogether" with those targeted.
Foreign Currency Reserve
Currently, Russia has the fourth-largest foreign currency reserve in the world at more than $630 billion while shifting away from US dollar holdings. But sanctions unleashed this week have already created significant disruption across the Russian economy.
Sanctioning Russian Central Bank?
However, sanctioning the Russian Central Bank would have been more painful for Moscow. The US and partners are "still finalizing this specific execution modality for the Central Bank sanctions," said the Biden administration's official.
If the West successfully sanctions the Russian Central Bank, it would prevent Moscow from shoring up the ruble and offset sanctions already in place. The move can effectively "disarm fortress Russia," by undermining its massive war chest.
Hamstring Russian Troops' Advance in Ukraine
The US official also conveyed that Washington hopes actions against the Central Bank will effectively hamstring Russia's military campaign in Ukraine.
Discussions to sanction Russia's Central Bank are currently in the initial stage between the US and EU officials, said two officials familiar with the talks. However, no final decision has been made and the structure of the sanctions remains unclear.
Decision to Isolate Putin
The West's move to expel Russian banks aims to isolate and punish Putin. Two days back on Thursday, Biden was being criticized for not removing Russia from SWIFT.
But within 48 hours Biden and the Western nations joined together and removed certain Russian banks from the payment system, which would strike the Russian President's years-long efforts to insulate his country's economy from sanctions.