The Council of the European Union has decided to exclude 7 Russian banks from the SWIFT system
Following the launch of a military operation against Ukraine by the Russian Federation; The EU, US, UK and several other countries have begun to impose broad economic sanctions against Russia. In our previous post, we developed the sanctions imposed by the United States. Another recent and critical sanction is the decision of the European Council decision and regulation of March 2, 2022, which removes 7 Russian banks from the SWIFT system.
European Commission President Ursula von der Leyen explained that the purpose of these decisions is to cut the main Russian banks from the SWIFT network and send a clear message to Putin and the Kremlin. Furthermore, the European Commission noted in a press release that these decisions were adopted in coordination with the Union’s international partners, the United Kingdom and the United States.
Scope of the Council’s regulation and decision of March 2, 2022
The scope of legislation 833/2014, which was enacted after the annexation of Crimea by Russia, has been expanded with the latest regulation. As a result, 7 Russian banks, namely VTB Bank, VEB Bank, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and their subsidiaries are excluded from the SWIFT system. As a result, these banks will not be able to use the system from March 12, 2022. The sanctions will also affect all legal persons, directly or indirectly, owned at 50% or more by the said banks.
The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, connects 11,000 financial institutions in 200 countries around the world. The removal of 7 Russian banks from the SWIFT system means that they will no longer be able to access foreign markets or perform cross-border fund transfers.
This prohibition does not apply to Sberbank or Gazprombank. The reason is that these two banks are the main payment channel for Russian oil and gas imports.
The export of euro banknotes to Russia, including the Russian Central Bank, is also prohibited by the regulations. The only exception to this rule is when the supply, export, sale or transfer of euro banknotes is required for natural persons and their families traveling to Russia and activities concerning the official purposes of diplomatic missions in Russia. Another sanction implemented by the regulation is the ban on investing in, participating in or contributing to projects co-financed by the Russian Direct Investment Fund.
Who is bound by EU Council regulations and decisions?
Council decisions are directly binding on EU member states, while Council regulations are binding on any person or entity under EU jurisdiction. Since the cooperative society SWIFT is based in Belgium and is subject to EU law, the respective decision of the European Council means that the 7 Russian banks mentioned above will not be able to use the SWIFT system.