Western governments crack down on Russian banking sector after Ukraine invasion

European governments along with the United States and Canada on Sunday ramped up the pressure on Vladimir Putin’s administration following the invasion of Ukraine with new sanctions aimed at hitting the Russian financial sector and economy.

Volunteers patrolled the streets of the Ukrainian capital Kyiv on Sunday as western governments took measures against the Russian banking sector following Russia's invasion of Ukraine. AFP - DANIEL LEAL

Several Russian banks will be disconnected from the Society for Worldwide Interbank Financial Telecommunication - Swift - interbank messaging system. 

Via the BIC code, which identifies a bank with a unique number, trillions of euros worth of transactions pass rapidly around the world under the network.

In a statement, Ursula von der Leyen, the president of the European Commission, said: “The exclusion of Russian banks from Swift will prevent these institutions from carrying out most of their global financial transactions. As a result, Russian exports and imports will be blocked.”

The sanction had been suggested before Putin ordered Russian forces into Ukraine on Thursday. Germany, Italy and Hungary had been reluctant to institute the measure.

But on Saturday night their governments yielded to domestic and international pressure and agreed to the move.

On Friday following a meeting of EU finance ministers, France's finance minister Bruno Le Maire described Swift as the financial nuclear weapon.

"The fact remains that when you have a nuclear weapon in your hands, you think before you use it," he said. "Some member countries have expressed reservations, we take them into account."

According to the website of the national association Rosswift, Russia is second only to the United States in the number of users, with some 300 Russian banks and institutions members of the system. More than half of Russian credit institutions are represented in Swift, the source said. 

"Russia’s war represents an assault on fundamental international rules and norms that have prevailed since the Second World War, which we are committed to defending,” the western governments said.

They added they were prepared to take further measures to hold Russia to account for its attack on Ukraine.

The leaders said restrictions would also be placed on Russia’s Central Bank.

They said the Central Bank would be prevented from using its international reserves of around 600 billion euros to undermine their broader sanctions.

The likely result will be a fall in the value of the rouble, inflation in Russia and the Central Bank's inability to defend the currency.

Von der Leyen said she would urge EU leaders to make sure they can freeze the bank's transactions and make it impossible for it to liquidate assets.

Battle

As governments reacted to the hostilities, Russian forces were reported to have targeted fuel facilities in Ukraine during a fourth day of fighting. 

An oil terminal was hit in Vasylkiv, 30 kilometres south-west of the capital, Kyiv.

"The enemy wants to destroy everything around," Natalia Balasinovich, the town’s mayor said in a video posted online.

Ukraine’s president Volodymyr Zelenskiy said his country's forces were holding off Russian troops advancing on Kyiv despite the bombardments.

And in a rallying call, he invited foreign combatants to join the country’s armed forces. He said they would help repel an invasion to save Europe and its values.

“Anyone who wants to join the defence of Ukraine, Europe and the world can come and fight side by side with the Ukrainians against the Russian war criminals,” his office said in a statement.

On Sunday, the Kremlin said a delegation had arrived in neighbouring Belarus for talks and was waiting for the Ukrainians.

However, Zelenskiy rejected Belarus as a venue, saying it was complicit in the invasion. But he has said he would be open to discussions in other countries.

"We have withstood and are successfully repelling enemy attacks. The fighting goes on," Zelenskiy said in a video message from the streets of Kyiv posted on his social media.

A US defence official said Ukraine's forces were putting up very determined resistance to Russia's air, land and sea advance, which has sent hundreds of thousands of Ukrainians fleeing westwards.

Russian forces though are expected to step up the intensity of their assaults in the next 24 hours.