an initial package of punishments against Russia has been prepared by the administration of President Joe Biden and will include the ban on the United States financial institutions to process transactions for major Russian banks, three people familiar with says the case.
The measures, which would only be implemented if Russia invades Ukraine, are aimed at hurting Russia economy by cutting “correspondent” banking relationships between targeted Russian banks and US banks that allow international Payments.
While US authorities have said banking restrictions will be part of of a package of possible sanctions, the administration’s plan to cut ties with correspondent banks – which underpin global money stream – has not been reported before.
The United States will also make the most powerful penalty tool against certain Russian persons and companies by placing them on specially designated nationals (SDN) lists hitting effectively out of the American bank system prohibiting their trade with Americans and freezing their US assets said the same sources.
The White House and the Treasury Department declined for comment.
The sources said that the package could change up to the last minute and it wasn’t clear who the targets would be. However, they believe that Russian High financial institutions such as VTB Bank, Sberbank, VEB and Gazprombank are possible targets.
Experts consulted by Reuters said that while the bank correspondent tool lacks punch of an SDN designation, which freezes a bank’s assets, they could still deal a significant blow to target banks by making it difficult to transact in US dollars, the global reserve currency.
Many of global trade is treated in dollars.
It is not clear whether Russian banks would be added to the SDN listbut both types of sanctions could hit Russia hard.
“Since a significant number of global trade operations are in American dollars it’s a penalty with bite, but without more complicated and deadly sanction of to be placed on SDN list and having everything assets in the United States or in hands of American people frozen,” said Washington attorney Kay Georgi, who specializes in international trade.
Sources noted that the administration could exempt certain transactions from the restrictions if deemed necessary.
The Biden administration has threatened tough banking sanctions against Russia for weeks in an attempt to dissuade Russian President Vladimir Putin from invading Ukraine. Moscow has piled up of 150,000 soldiers on The borders of Ukraine, but Putin denied plans launch a attack.
Pierre Harell, who is sitting on the National Security Council, said last months that “big blows financial sanctions” were part of of a strategy hurt russia economy but spare its citizens.
“The goal of the financial penalties is really to have short term initial costs on Russia, to trigger capital flight, trigger inflation, to make the Russian powerhouse bank provide bailouts to its banks,” he said in a late speech last month.
The stark warnings have put some U.S. financial companies on edge. Members of the financial services and payment industries have been in to touch in The last days with the bureau from the US Treasury Department of Foreign Assets Control, which administers the sanctions, sources said.
Tensions have risen over on weekends like Russia extended military drills in Belarus, exacerbating the fears of Western powers of an impending russian invasion of Ukraine.
Biden and Putin on Agreed Sunday in principle at a summit, France said, offering hope that the conflict could be avoided.
British Prime Minister Boris Johnson said the United States and Britain would reduce off Russian companies » access in US dollars and British pounds if the Kremlin orders a invasion.
The Biden administration has been just as aggressive in his rhetoric. In a briefing on On Friday, Deputy National Security Adviser Daleep Singh told reporters that the cost in Russia of a invasion would be “huge, both for son economy and its strategic position in the world.”