Sanctions in the Ukraine war: Russia goes to the reserves

What sanctions were announced on Sunday night?

The internationally coordinated third sanctions package consists of three parts: the exclusion of a significant number of Russian banks from the international bank payments network SWIFT, the blocking of the international reserves of the Russian central bank and further steps against oligarchs, their families and partners.

This includes freezing their assets, but also restricting the sale of “EU passports” to them.

The preparations for the package began immediately after the special EU summit on Thursday evening.

The EU foreign ministers and ambassadors of the member states met on Sunday.

The final adoption is a matter of hours, it said on Sunday.

The package is also aimed at Belarus.

Will Russia now be fully decoupled from SWIFT?

It is about the exclusion of selected banks.

The list of banks initially remained secret.

What is clear, however, is that banks with a total share of 70 percent of the Russian banking market are at stake.

The exclusion does not completely decouple the banks from the international financial markets.

However, it makes transactions much more difficult and expensive for them.

What are the exceptions?

Three types of banks should – at least initially – be exempt from the SWIFT exclusion.

Firstly, there are banks that are needed to process payments for energy supplies, secondly, banks that are important for paying off Russia's debts, and thirdly, banks whose European partner credit institutions could otherwise get into serious financial difficulties.

After all, it is not the goal to immediately trigger a serious financial crisis with this step.

Last but not least, the concerns of Germany and Italy are addressed with the exceptions.

Can transactions simply be processed through other banks?

Theoretically yes.

However, it is expressly emphasized in Brussels that the list of banks can be adjusted at any time and at very short notice if there is a suspicion that it is being circumvented.

Can Russia otherwise gain access to the financial markets?

To make this as difficult as possible, the sanctions package has three parts.

Blocking the National Bank's reserves prevents Russia from using them to cushion the consequences of the SWIFT ban.

Freezing the Russian oligarchs' assets and restricting their access to the EU is designed to make it impossible for them to jump into the breach and do important business through their personal accounts.

So one thing leads to another.

What role does the blockade of the National Bank's reserves play?

This blockade is the heart of the package for the European Commission.

It is intended to prevent Russia from ever selling its reserves of euros, dollars, pounds and other currencies in order to use the rubles thus collected to prop up banks and companies that have been troubled by the sanctions.

The money can also no longer be used to intervene in the foreign exchange market to support the ruble.

Freezing the reserves makes it easier for the West to confiscate parts of them in extreme cases.

With Russia's central bank, a larger economy is being considered for the first time with this tough measure.

So far only funds from the central banks of countries such as Iran, Venezuela and North Korea, Syria and Afghanistan have been frozen.

Economists assume

that the package of sanctions is likely to plunge Russia into a severe financial and economic crisis.

A collapse of the financial system is also not excluded.