Washington has an initial package of sanctions prepared against Moscow that includes banning transaction processing between US financial institutions and major Russian banks, according to three people familiar with the matter.
The ban – which would only be implemented if Russia invades Ukraine – aims to inflict damage to the Russian economy by cutting the correspondent banking relationships between targeted Russian banks and US banks that enable international payments.
President Joe Biden’s administration plan to cut correspondent banking which underpins global money flows ties has not previously been reported although it has been said that the package of possible sanctions would include banking restrictions.
Certain Russian individuals and companies will also face the US most powerful sanctioning tool – being put on the Specially Designated Nationals (SDN) list – that will see them kicked out of the US banking system.
They would also be banned from trading with Americans and their US assets will be frozen.
Although it is unclear who the targets would be of the package, that, according to sources, could change up to the last minute, it is believed that the top Russian financial institutions VTB Bank, Sberbank, VEB, and Gazprombank are among the possible targets.
Experts believe that even by making it difficult for Russian financial institutions to transact in US dollars, the global reserve currency, they could still deal a meaningful blow to the target banks even without the punch of an SDN designation since much of global trade is transacted in dollars.
Washington lawyer Kay Georgi, who specializes in international trade, said that this would be a sanction with bite since a significant number of global trade transactions are in US dollars.
However, he added, the more complicated and deadly sanction of being placed on the SDN list and having all assets in the US or in the hands of US persons frozen would hit Russia even harder.
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