Not so SWIFT after all! EU savaged as Russian banks given time to prepare for sanctions

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The European Union said on Wednesday it was excluding seven Russian banks from the SWIFT messaging system, but stopped short of including those handling energy payments, in the latest sanctions imposed on Russia over its invasion of Ukraine.

Russia’s second-largest bank VTB, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and VEB will each be given 10 days to wind-down their SWIFT operations, the EU said in its official journal.

SWIFT is the dominant messaging system underpinning global financial transactions and the EU, the United States, Britain and Canada moved on Saturday to block certain Russian banks from it, but had not said which would be hit.

The United States and Britain had been pushing for the SWIFT ban, but some in the eurozone had taken some persuading given the region’s reliance on Russian energy exports.

But according to Eurointelligence, the move came short of ambitions.

They wrote: “The reduced ambitions embed an important piece of hard information.

“It is telling us that EU member states will not be ready to impose transactional sanctions on Russia in areas deemed vital to the EU economy, especially the import of Russian gas, oil and coal.”

SWIFT said in a statement that it would disconnect the seven Russian banks from their network on March 12, as required by EU regulations.

Eurointelligence believes the ten days notice will allow Russia to prepare for the backlash, rendering the sanctions practically inefficient.

They added: “The ban will only come into effect in ten days, which will allow the Russians to reorganise their banking system, and we presume, re-route payments through banks that are not affected by the sanctions.

“What this means is that the Swift ban falls into the SINO category: sanctions in name only.

“The EU is cheering on the Ukrainian side from a safe distance, watching from warm living rooms, heated by Russian gas.”

Removing Russian banks from SWIFT, a measure seen as drastic and unlikely only a week ago, is one of the most powerful tools Western authorities have used to punish Russia for what Moscow describes as a “special operation” in Ukraine.

A senior EU official said the banks were chosen based on their connections to the Russian state, with public banks already sanctioned after Russia’s annexation of Crimea in 2014.

The official said: ”All these banks that we have listed under SWIFT… they are all based on their connection to the state and the implicit connection to the war effort. We have not gone for a blanket ban across the whole banking system.”

Sberbank, Russia’s largest lender, and Gazprombank were not included because they are the main channels for payments for Russian oil and gas, which EU countries are still buying despite the conflict in Ukraine.

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The EU official added that these two Russian banks were nevertheless subject to other measures.

Officials have been concerned about disrupting energy flows to Europe and the official said it was not possible simply to allow energy-related transactions and exclude others as SWIFT was unable to differentiate between types of payments.

Polish Prime Minister Mateusz Morawiecki said the decision to exclude Sberbank and Gazprombank from sanctions due to “transactions related to energy supplies to the EU” was unacceptable.

He wrote on Facebook:”As Poland, we demand that all Russian entities, thanks to which Russia finances the war in Ukraine, be effectively and fully covered by sanctions.”

On Thursday, the Lithuanian foreign minister said the EU must disconnect all Russian banks from SWIFT payment system and stop importing energy from Russia.

Gabrielius Landsbergis said: “We must strive that all Russian banks are disconnected from SWIFT, we must dare to refuse energy imports from Russia to Europe.”

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