U.S., UK And EU To Impose Severe Sanctions On Russia

The United States and its allies are coordinating new sanctions on Russia after Moscow recognized two regions in eastern Ukraine as independent, officials said, Karin Strohecker reported for Reuters.

Photo Insert: EU President Ursula von der Leyen and US President Joe Biden

European Union member states are also considering sanctions, including Germany, where chancellor Olaf Scholz, in response to Moscow's actions froze the certification of the Russia-led Nord Stream 2 gas pipeline, denying Moscow a huge source of income.

Some smaller Russian state-owned banks are already under sanctions: Washington imposed curbs on Bank Rossiya in 2014 for its close ties to Kremlin officials.

The Biden administration has prepared a sweeping measure to hurt the Russian economy which would cut the "correspondent" banking relationships between targeted Russian banks and US banks that enable international payments, mainly through the Swift system.

Washington also will wield its most powerful sanctioning tool against certain Russian individuals and companies by placing them on the Specially Designated Nationals (SDN) list, effectively kicking them out of the US banking system, banning their trade with Americans, and freezing their US assets.

Sources familiar with the planned measures said VTB Bank, Sberbank, VEB, and Gazprombank are possible targets. It is unclear whether Russian banks would be added to the SDN list, but both types of sanctions could hit Russia hard and make it difficult to transact in US dollars.

The US may also ban the sale of microprocessors and other components with military applications as well as equipment needed for the manufacture of jet engines, technology for submarines, and lasers.

Russia's large banks are deeply integrated into the global financial system, meaning sanctions could be felt far beyond its borders. Data from the Bank of International Settlements (BIS) shows that European lenders hold the lion's share of the nearly $30 billion in foreign banks' exposure to Russia.

According to data from Russia's central bank, total Russian banking foreign assets and liabilities stood at $200.6 billion and $134.5 billion respectively with the US dollar share amounting to around 53% of both, down from 76-81% two decades ago.

Britain threatened last week to block Russian companies from raising capital in London, Europe's financial center for such transactions, with Prime Minister Boris Johnson saying the government would target Russian banks and Russian companies.

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