Joe Biden has put considerable pressure on the Russian economy by cutting off the country’s largest bank, Sberbank, from the US financial system.
Sberbank accounts for almost a third of Russia’s banking sector. The lender and four other financial institutions the US targeted on Thursday oversee about $1 billion in total assets.
“The sanctions that we have imposed are beyond anything that has ever been taken,” the US president said on Thursday. “The sanctions that we imposed have made two-thirds of the world join us. They are profound sanctions.”
Sanctions, imposed in response to Russia Invasion of Ukraine, which restricts Sberbank’s access to US dollar transactions. The US also froze assets at four other Russian banks, including the second largest lender, VTB, as well as three mid-tier banks, Bank Otkritie, Sovcombank OJSC and Novikombank.
But the US has stopped imposing such harsh restrictions on Gazprombank, Russia’s third-largest bank. State-controlled lenders are the main focal point for foreign payments for oil and gas.
Cutting Gazprombank from trading in US dollars would have significant consequences for Europe, which is dependent on Russia for 40% of its natural gas supplies and 26% of its oil.
Although Russian banks still use the Swift messaging system, Biden said there is still an option to cut them off from the global payments initiative that sits at the heart of global commerce and facilitates high-value transactions. trillions of dollars every day.
World leaders are divided about should cut Russia from Swiftthis will deal a heavy blow to banks and their ability to trade beyond their borders.
Boris Johnson, British Prime Minister, has push “very hard” For such a move, though, he has faced opposition from Olaf Scholz, the German chancellor, according to officials in both governments.
“These sanctions will have a significant impact on Russia’s overall economy, and the average Russian will feel the cost,” said Clay Lowery, executive vice president of the Institute of International Finance. know.
“These sanctions target Russia’s domestic financial system, causing banks to flee and forcing Russia’s central bank to continue raising interest rates. As a result, we are likely to see negative growth in an economy already stymied by growing isolationism.”
Earlier, on Thursday, Johnson added Russia’s second largest bank, VTB, to British sanctions list but does not include Sberbank. VTB accounts for 16.4% of Russia’s banking assets, compared with Sberbank’s 32.6%.
“Punishing other retail banks like VTB and Sberbank would cause significant devastation, but the ones that do not,” said Paul Feldberg, a partner on the investigation, compliance and defense team at law firm Jenner & Block. Ordinary Russian citizens will also pay the price.
One in two Russians has an account at Sberbank. Cutting banks’ access to dollar-denominated transactions will have a serious impact on the Russian economy’s ability to do business outside its borders.
According to Fitch, more than half of Russia’s exports are denominated in US dollars, down from 80% at the end of 2013. This equates to $300 billion, or 19% of gross domestic product.
Sberbank’s share price fell more than 50% on Thursday as markets predicted the Russian economy would take a hit following the Ukraine invasion and the West considers sanctions on its biggest banks.
Sberbank said on Thursday evening that its systems and offices are up and running and customer funds are fully available to them.
“Sberbank is closely studying new working conditions in light of sanctions related to agent accounts. The restrictions adopted do not affect the safety and availability of client funds,” it said.
“Sberbank has all the necessary resources, management experience and expertise to operate in the current environment.”
