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The EU Just Cut Russia’s Largest Bank Out of SWIFT

Neil lives in Canada and writes about society and politics.
Published: May 31, 2022
The EU has cut Russia's Sberbank out of the SWIFT network.
The logo of the Russian state-owned bank Sberbank (R) in Vienna on Feb. 28, 2022. The European Union announced on May 30 that it would cut Russia’s most key financial institution, Sberbank, out of the SWIFT network at the same time as embargoing 70 percent of its oil imports. (Image: ROLAND SCHLAGER/APA/AFP via Getty Images)

The European Union has announced it will be excluding Russia’s largest financial institution, Sberbank, from the SWIFT network in addition to imposing a massive embargo on Russian oil. 

President of the European Council, Charles Michel, made the announcement on Twitter on May 30 stating that a new package of sanctions just approved would shortly come into effect. 

Measures included “de-Swifting the largest Russian bank Sberbank,” “banning 3 more Russian state-owned broadcasters,” and “sanctioning individuals responsible for war crimes in #Ukraine,” Michel stated.

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A second tweet stated that 75 percent of Russian oil exports to the EU would be immediately banned, a figure set to increase to 90 percent by the end of the year.

Reporting on the development by Russian state media TASS said that the EU had been intending to deploy a new set of sanctions for at least a month, but had been stonewalled by “Hungary and a number of other states, who believe that such measures will inflict catastrophic damage on European economy. [sic]”

“The European Commission had to exclude Russian pipeline oil from the package to obtain Hungary’s consent,” the article added.

Hungary’s Prime Minister Viktor Orban posted on Facebook, “An agreement was reached. Hungary is exempt from the oil embargo!”

An April 6 Press Release by the U.S. Department of Treasury on a then-new round of sanctions against Russian entities stated that Sberbank is “uniquely important to the Russian Federation economy, holding about a third of all bank assets in Russia.”

“Sberbank is the largest financial institution in Russia and is majority-owned by the Government of the Russian Federation (GoR). It holds the largest market share of savings deposits in the country, is the main creditor of the Russian economy, and is deemed by the GoR to be a systemically important financial institution,” the Release added.

Reporting from Politico noted, “The measures must still be put into legal language and officially approved by the Council of the EU — formalities that officials said would take place later this week.”

Politico added that although the exception to the embargo for Hungary actually applied to all pipeline oil—and therefore could be accessed by Germany and Poland—the countries “had voluntarily agreed to stop all purchases of Russian oil by the end of the year — effectively cutting off supplies from the Druzhba pipeline’s northern section.”

The article added that EU officials “said they would work to improve infrastructure that would allow Hungary to receive more oil through an alternative pipeline from Croatia, at which point Budapest’s exception could be phased out.”

A Jan. 31 article by New York Times in anticipation of the pending war between Russia and Ukraine forecasted the method of removing Russian banks from SWIFT as a potential tool by the International Rules Based Order.

However, the article noted that the move’s bark was likely louder than its bite.

“Several countries including Russia have developed their own financial messaging systems that, while less sophisticated than Swift, could allow Russian financial firms to maintain communications with the world.” 

“Russia began developing its system in 2014 amid threats of escalating sanctions from the United States,” the article reads.

The outlet quoted one Eastern European scholar at the George Washington University who co-authored a paper on potential Russian sanctions issued by foreign policy distributor The Atlantic Council as flatly stating, “Cutting Russia off from Swift — it won’t be as painful for Russia as Western officials envision.”

A February article by Euro News cautioned that the move was not without its risks for the EU, however, “A total expulsion from SWIFT would mean that virtually all EU-Russia trade would come to a sudden halt, disrupting a significant part of the bloc’s economy.”

“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,” it continued.

And noted pointedly, “If this enormous amount of money were to disappear overnight, member states would feel the pain in an instantaneous and painful way. Gas prices would skyrocket, sending consumer bills to impossible highs and forcing many factories to stop production altogether.”