WASHINGTON – The United States imposed sanctions on Russia in retaliation for its attack on Ukraine, targeting its two biggest banks and members of the elite in new measures as Washington warned more action could come.
Among the targets were five major Russian banks, including state-backed Sberbank and VTB, the country’s two largest lenders, as well as wealthy individuals and their families. The United States also announced new export control measures.
Washington imposed the new sanctions after Russia launched an offensive on Ukraine on Thursday, assaulting by land, sea and air in the biggest attack by one state against another in Europe since World War Two.
The US Treasury Department said US banks must sever their correspondent banking ties – which allow banks to make payments between one another and move money around the globe – with Russia’s largest lender, Sberbank, and 25 of its subsidiaries within 30 days.
The restrictions aim to hurt the Russian economy by blocking Sberbank from processing and settling payments within the US financial system.
Sberbank said according to Reuters that it was operating normally but was studying the implications of sanctions imposed against it.
Daniel Alter, a former general counsel at New York’s Department of Financial Services, said corresponding banks are the “plumbing for international money transfers,” used to enable payments to be sent and received.
“The power of the sanction comes from the fact that most of the world trade at some point is conducted in dollars,” he said.
Officials in Washington also wielded the US government’s most powerful sanctioning tool, adding Russia’s second-largest bank VTB as well as three others – Otkritie, Novikombank and Sovcombank – to the Specially Designated Nationals (SDN) list.
The move effectively kicks the banks out of the US financial system, bans their trade with Americans, and freezes their US assets.
Every day Russian banks conduct about $46 billion worth of foreign exchange transactions globally, 80% of which are in US dollars, the Treasury said, adding that “the vast majority of those transactions will now be disrupted.” The Treasury authorized certain transactions related to energy.
VTB said the imposition of Western sanctions on its operations would limit the use of its cards outside Russia and advised customers in other countries to withdraw funds or pay using different banks.
The other banks did not immediately reply to requests for comment. The Russian embassy in the United States also did not immediately reply to a request for comment.
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