EU weighs cutting Russian banks VTB and VEB off global payment messaging network

Russia’s second-largest bank is among seven lenders that could be cut off from the Swift messaging network under proposals being discussed by EU member states.

VTB Bank would lose access to the network, which helps lenders to make cross-border payments, if the EU goes ahead with the proposals following consultations with the US and other partners, according to people briefed on the discussions.

Banks currently under consideration also include Vnesheconombank (VEB), Rossiya Bank, Sovcombank, Bank Otkritie, Novikombank, and Promsvyazbank, the people said, insisting on anonymity because the list is not yet finalised.

This proposed list does not name Sberbank, Russia’s biggest lender by assets, nor Gazprombank, which is heavily involved in its energy sector, they said.

The decision to cut some Russians banks from the Belgian-based Swift system, was announced over the weekend in a joint statement by the European Commission, US, Italy, France, Germany, UK and Canada but has required further discussions over ways of intensifying pressure on the Russian financial system.

The list is expected to be finalised on Tuesday afternoon, and its content might change prior to official publication. 

The plan underlines western allies’ willingness to wield a measure they previously saw as a last-resort option within their sanctions toolbox. Volodymyr Zelensky, the Ukrainian president, has been pushing leaders for days to cut Russian banks from Swift.

Swift, a co-operative, is used by more than 11,000 banks and financial institutions worldwide and handles 42mn messages a day, facilitating trillions of dollars worth of transactions.

On Tuesday, Swift said on its website: “Diplomatic decisions have brought Swift into efforts to bring this crisis to an end, and we will always comply with applicable sanctions laws.

“We are engaging with these authorities to understand which entities will be subject to these new measures and will disconnect them once we receive legal instruction to do so,” it added.

Being cut off from Swift would not prevent Russian banks from carrying out cross-border transactions, but doing so would become more costly and arduous. Foreign dealings would rely on the use of slower communication tools, such as email and telex.

However, the selection of banks being discussed suggests the western allies are also seeking to mitigate the fallout from the decision for oil and gas payments in particular.

The EU and its partners have already hit a range of Russian banks with other punitive measures, among them Rossiya Bank and Promsvyazbank. The latter lender plays a major role in financing Russia’s defence industry. VTB was hit by US sanctions on Thursday last week.

Speaking to the European Parliament on Tuesday, Ursula von der Leyen, the commission president, said the EU was now in the midst of the largest sanctions package in its history, adding “these sanctions will take a heavy toll on the Russian economy and the Kremlin”.

Among the moves are not only the disconnection of Swift from important Russian banks but a ban on transactions with the Russian central bank, which she said “paralyses billions in foreign reserves, turning off the tap on Putin’s war”.