Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Russian bank Sberbank was exempted because they handle most of the payments related to gas and oil exports.

Sberbank, Gazprombank exempted as 7 Russian banks banned from SWIFT

As the battle in Ukraine rages, the European Union has made official the list of Russian banks that will be expelled from SWIFT, the high-security system that allows financial transactions and underpins the global economy. Notably, the ban excludes two of the country's biggest institutions, Sberbank and Gazprombank.
The final list targets seven banks considered to have close links with the regime of President Vladimir Putin and are seen as complicit, either directly or indirectly, in financing the war.

Notably, the ban excludes two of the country's biggest institutions, Sberbank and Gazprombank.

The two were exempted because they handle most of the payments related to gas and oil exports, on which the EU heavily depends to produce energy. Around 40% of the gas consumed by the bloc comes from Russia.

It shows that while EU unity has been consistently strong throughout the crisis, it still bumps into limits when faced with the crucial question of energy supplies.

The expelled institutions are VTB Bank, Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank and Sovcombank, as well as VEB, Russia's development bank.

The list was unanimously adopted by member states on Wednesday and will enter into force in 10 days to allow both SWIFT and EU business to adapt to the measures.

"Today's decision to disconnect key Russian banks from the SWIFT network will send yet another very clear signal to Putin and the Kremlin," said European Commission President Ursula von der Leyen in a statement.

Since SWIFT is a Belgium-based company and therefore subject to EU law, the sanctions mean the seven banks will be completely prohibited from using the system to send payment messages to any other bank or institution connected to SWIFT anywhere in the world.

Today, SWIFT, which stands for the Society for Worldwide Interbank Financial Telecommunication, links more than 11,000 financial institutions in more than 200 counties and territories. It sends over 42 million messages per day that facilitate domestic and international business deals.

Although the system is by far the leading intermediary for financial transactions, it is not the only one.

Alternatives to SWIFT include China's CIPS, India's SFMS and Russia's SPFS, as well as more rudimentary methods such as tax and phone messages, which are time-consuming and pose security risks.

About 50% of Russia's bank are connected and use SWIFT, while others rely on SPFS and other bilateral instruments.

Member states have spent the last days discussing who to include in the SWIFT blacklist and how to minimize the economic blowback against the bloc.

During negotiations, over half of member states wanted Sberbank and Gazprombank, Russia's first and third largest banks, to be equally expelled from the electronic system but consensus could not be reached as some capitals expressed their concern, Euronews understands.

The selection was made as a matter of compromise and in coordination with the United States and the United Kingdom. The blacklist will be expanded "at short notice" if the situation in Ukraine further deteriorates, the Commission noted.

Speaking on condition of anonymity, a senior EU official explained the SWIFT ban was an all-or-nothing question: the EU cannot ask the system to ban certain financial transactions while sparing others, such as those involving gas exports. The bank is either expelled or allowed inside SWIFT.

This means that, for the time being, member states will be able to continue buying Russian gas without major disruption, unless the Kremlin decides to retaliate by cutting supplies.

An energy cut-off would inflict great pain on European consumers and citizens but also on Russia's own economy: oil and gas account for 60% of Russia's exports, with more than half destined for Europe.

The sector represents a third of the federal budget revenue.

The war is already putting pressure on the gas market: prices are back above the threshold of €100 megawatt per hour at the Dutch Title Transfer Facility, Europe's leading benchmark.

While extremely high, the price-tag does not come off as a surprise for member states, which have been dealing with a persisting power crunch since late summer, well before tensions at the Ukraine border began to ratchet up.

The effects from the SWIFT switch-off will be first felt by Russian banks and their clients. The ruble's value has plummeted to an all-time low, borrowing costs have skyrocketed and the stock market remains closed to avoid a total meltdown.

At the same time, Russian citizens are queuing in front of ATMs in a desperate attempt to retrieve their savings before they are frozen or vanish, as the threat of hyperinflation looms large.

The measures are also expected to hit the EU's economy and trade flows, although the scope of the damage is still unclear and will take more time to materialize.

Russia is the EU's fifth-largest trade partner: in 2020, total trade in goods between the two amounted to €174.3 billion, of which €79 million were EU exports, according to the European Commission.

Exempting the energy payments associated with Sberbank and Gazpromban could help cushion the impact for member states. Figures from 2021 showed the two spared banks had assets worth 37.50 trillion and 7.53 trillion in rubles, respectively.

The blacklisted banks own much less, except for VTB, which is the second largest bank in the country with 18.59 trillion in rubles. Barring VEB, which is a development corporation, the six expelled institutions represent 25% of the Russian banking system, the EU official said.

The SWIFT ban comes on top of a lengthy series of financial sanctions that the EU and its allies have quickly slapped on Russia with the aim of crippling the state's war machine.

Additional measures include, among others, the freezing of foreign reserves owned by the Russian Central Bank, cutting Russian access to the EU's capital markets and a prohibition to provide euro banknotes.

Some of the sanctions will also affect Sberbank and Gazprombank. Put together, the Commission says the measures will target between 70% and 80% of the Russian banking system.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
Italy Faces Population Decline Amid Youth Emigration
Trump Accuses China of Violating Trade Agreement
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Russia Accuses Serbia of Supplying Arms to Ukraine
Gerry Adams Wins Libel Case Against BBC
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
EU Majority Demands Hungary Reverse Anti-LGBTQ+ Laws
Top Hotel Picks for 2025 Stays in Budapest Revealed
Iron Maiden Unveils 2025 Tour Setlist in Budapest
Chinese Film Week Opens in Budapest to Promote Cultural Exchange
Budapest Airport Launches Direct Flights to Shymkent
Von der Leyen Denies Urging EU Officials to Skip Budapest Pride
Alcaraz and Sinner Advance with Convincing Wins at Roland Garros
EU Ministers Lack Consensus on Sanctioning Hungary Over Rule of Law
EU Nations Urge Action Against Hungary's Pride Parade Ban
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
U.S. Considers Withdrawing Troops from Europe
Russia Deploys Motorbike Squads in Ukraine Conflict
Critics Accuse European Court of Human Rights of Overreach
Spain Proposes 100% Tax on Non-EU Holiday Home Purchases
German Intelligence Labels AfD as Far-Right Extremist
Geert Wilders Threatens Dutch Coalition Over Migration Policy
Hungary Faces Multiple Challenges Amid EU Tensions and Political Shifts
Denmark Increases Retirement Age to 70, Setting a European Precedent
Any trade deal with US must be based on respect not threats', says EU commissioner
UK Leads in Remote Work Adoption, Averaging 1.8 Days a Week
Thirteen Killed in Russian Attacks Across Ukraine
High-Profile Incidents and Political Developments Dominate Global News
Netanyahu Accuses Western Leaders of 'Emboldening Hamas'
Ukraine and Russia Conduct Largest Prisoner Exchange of the War
×