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
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Man Convicted of Fraud After Booking Over 120 Free Flights Posing as Flight Attendant
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
Beata Thunberg Rebrands as Beata Ernman Amidst Sister's Activism Controversy
Hungarian Parliament Approves Citizenship Suspension Law
Prime Minister Orbán Criticizes EU's Ukraine Accession Plans
Hungarian Delicacies Introduced to Japanese Market
Hungary's Industrial Output Rises Amid Battery Sector Slump
President Sulyok Celebrates 15 Years of Hungarian Unity Efforts
Hungary's Szeleczki Shines at World Judo Championships
Visegrád Construction Trends Diverge as Hungary Lags
Hungary Hosts National Quantum Technology Workshop
Hungarian Animation Featured at Annecy Festival
Israel Issues Ultimatum to Iran Over Potential Retaliation and Nuclear Facilities
UK and EU Reach New Economic Agreement
Coinbase CEO Warns Bitcoin Could Supplant US Dollar Amid Mounting National Debt
Trump to Iran: Make a Deal — Sign or Die
Operation "Like a Lion": Israel Strikes Iran in Unprecedented Offensive
Israel Launches 'Operation Rising Lion' Targeting Iranian Nuclear and Military Sites
UK and EU Reach Agreement on Gibraltar's Schengen Integration
Israeli Finance Minister Imposes Banking Penalties on Palestinians
U.S. Inflation Rises to 2.4% in May Amid Trade Tensions
Trump's Policies Prompt Decline in Chinese Student Enrollment in U.S.
Global Oceans Near Record Temperatures as CO₂ Levels Climb
Trump Announces U.S.-China Trade Deal Covering Rare Earths
Smuggled U.S. Fuel Funds Mexican Cartels Amid Crackdown
Austrian School Shooting Leaves Nine Dead in Graz
Bezos's Lavish Venice Wedding Sparks Local Protests
Europe Prepares for Historic Lunar Rover Landing
Italian Parents Seek Therapy Amid Lengthy School Holidays
British Fishing Vessel Seized by France Fined €30,000
Dutch Government Collapses Amid Migration Policy Dispute
UK Commits to 3.5% GDP Defence Spending Under NATO Pressure
Germany Moves to Expedite Migrant Deportations
US Urges UK to Raise Defence Spending to 5% of GDP
Israeli Forces Intercept Gaza-Bound Aid Vessel Carrying Greta Thunberg
IMF Warns of Severe Global Trade War Impacts on Emerging Markets
Low Turnout Jeopardizes Italy's Citizenship Reform Referendum
Transatlantic Interest Rate Divergence Widens as Trump Pressures Powell
EU Lawmaker Calls for Broader Exemptions in Supply Chain Legislation
France's Defense Spending Plans Threatened by High National Debt
European Small-Cap Stocks Outperform U.S. Rivals Amid Growth Revival
Switzerland Proposes $26 Billion Capital Increase for UBS
×