The EU expels seven Russian banks from the SWIFT system

The European Union (EU) published this Wednesday the rule that expels seven Russian banks from the SWIFT financial messaging system, as a result of the invasion of Ukraine. However, the list does not include Sberbankthe largest entity in the country, nor to Gazprombank.

The decision to keep these two banks has been taken so as not to hinder gas and oil purchase operations by European countries. According to community sources, these two entities process the vast majority of energy payments with the EU, so their inclusion would have harmed the Member States and European companies.

“We would have liked to take specific transactions offline, but SWIFT doesn’t work like that. The different types of transactions cannot be discriminated, so we had to leave them out of the lista”, have justified the same sources.

Finally, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank, Vnesheconombank (VEB) and VTB will be expelledthe latter the second largest in the Russian financial system, according to the Official Journal of the EU.

The disconnection will be effective in 10 days

After the pact with the G7 powers this weekend, the disconnection will be effective within 10 days. It will also apply to any person, entity and body established in Russia and whose property rights belong directly or indirectly to more than fifty % to one of the affected entities.

Furthermore, the EU has prohibited from investing in future projects co-financed by the Russian Fund for Direct Investmentsas well as sell, supply, transfer or export banknotes denominated in euros to Russia, including the Government and the Central Bank of Russia.

The possibility of sanctioning Russia by disconnecting it from SWIFT was already put on the table in 2014 in the wake of the illegal annexation of Crimea and then Moscow calculated that its GDP would fall by 5% as a result. The warning led him to create his own financial messaging system at the domestic level, although at the moment this is only used in 20% of internal transactions.

Transactions will be slower and more expensive

In this context, community sources have called for “realists” because “being disconnected from SWIFT does not mean that they cannot make payments” because they will always be able to search “alternative methods”such as using email or fax. However, transactions will be much slower and more expensive.

It is a problem not to be in SWIFT

“People want to be in SWIFT, it is a problem not to be in SWIFT“, they have claimed, to later point out that for million-dollar transactions it may be profitable to assume the additional cost or wait longer to carry out the operations, but the costs for smaller payments will become “prohibitive”.

In any case, from Brussels has emphasized that it is a first list that it will be under constant “review” and that it is subject to possible extensions depending on how the conflict in Ukraine evolves.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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