Russia SWIFT Ban Still Being Finalised; China Urges Dialogue

Seven Russian banks will likely be cut off from SWIFT; Japan will freeze Russia’s yen reserves; Korea will suspend transactions with seven Russian banks and their subsidiaries.

US, UK and EU banned transactions with Russia’s central bank on Monday, limiting its ability to use its US$630 billion in FX reserves, including an estimated US$100 billion held in US currency.

According to reports, Russia is expected to try to mitigate the impact of global sanctions actions by relying on energy sales and leaning on its reserves in gold and the Chinese yuan, as well as by moving funds through smaller banks and accounts of elite families not covered by the sanctions.

The sanctions levied against Russia for its invasion of Ukraine have so far included asset freezes, travel bans, export controls, and other measures – covering the country’s banks, corporates, top officials, and oligarchs.


The US and its allies announced a decision on 25 February to shut some of Russian banks out of the SWIFT financial messaging system. The list of banks that will be cut off is being finalised by the EU because SWIFT is under Belgian authority.

According to Bloomberg, a total of seven Russian banks will likely be cut off from SWIFT: VTB Bank, Bank Rossiya, Bank Otkritie, Novikombank, Promsvyazbank PJSC, Sovcombank PJSC and VEB.RF. Russia’s biggest lender Sberbank, as well as Gazprombank, was spared.

Some countries, including Poland, had pushed for more banks to be included in the SWIFT ban, but there are concerns that the consequences could spill over into the global economy, especially when it comes to energy supplies.

Once the list of banks is finalised and adopted, the SWIFT ban will come into force ten days later. SWIFT reportedly said on Tuesday that it was waiting to see which banks authorities want disconnected, saying it will do so once it receives legal instructions.


Switzerland shocked the world earlier this week by breaking from its traditionally neutral status in international affairs and announcing a decision to freeze the assets of Russian individuals and companies on the EU’s sanctions list.

Russian citizens are estimated to have about US$24.9 billion deposited with French banks, US$23.2 billion in Swiss banks, US$14.5 billion in UK banks. All of this and more will be frozen.

The Bank of Japan (BOJ) also said on Tuesday it will freeze Russia’s yen-denominated foreign reserves. As of last year, the BOJ was holding JPY4-5 trillion (US$35-43 billion) in FX reserves for Russia.

Elsewhere in Asia, Singapore, Australia and New Zealand have also imposed restrictions on dealing with Russian financial institutions and counterparties.

South Korea initially said it would tighten export controls on Russia. On Tuesday, the country’s finance ministry said it would suspend financial transactions with seven major Russian banks and their subsidiaries, in line with US sanctions.

The ministry also asked the public and financial institutions to suspend participation in both the primary and secondary markets for Russian state bonds issued from 2 March onwards. Korean banks had about US$1.47 billion in exposure to Russia as of end-September.


China is Russia’s biggest trading partner and since 2014 has had a US$150 billion swap line with the Russian central bank. It has also signed Russian banks onto its homegrown payments settlement system known as Cross-Border Interbank Payment System (CIPS), seen as an alternative to the SWIFT messaging system.

Yuan settlements accounted for 28% of Chinese exports to Russia in the first half of 2021, compared with just 2% in 2013, as both countries have been looking to reduce their reliance on the US dollar and develop their own cross-border payment systems.

About 13% of Russia’s reserves, or about US$77 billion, were held in yuan assets as of June 2021. Observers say China is unlikely to follow Western nations to freeze Russia’s yuan assets, but that it is unclear whether it would want to risk sanctions exposure if it provided Russia a lifeline.

China has said it “fiercely” opposes sanctions against Russia, and that dialogue “is the only way to stop the fighting”. On Tuesday, China signalled a willingness to play a mediator role to achieve a ceasefire between Russia and Ukraine, with its foreign minister Wang Yi saying that Beijing is “extremely concerned” about the harm to civilians. China is still trying to evacuate thousands of its citizens from Ukraine.

Other developments

  • Visa and Mastercard have blocked multiple Russian financial institutions from their payment networks, and each pledged to donate US$2 million to humanitarian aid in Ukraine
  • Citigroup disclosed in its annual report that it has almost US$10 billion worth of exposure to Russia, the most among US financial institutions
  • Shell, HSBC, Equinor, and AerCap have joined a growing list of companies looking to exit Russia
  • The London Stock Exchange (LSE) said will stop trading in two global depository receipts (GDRs) for Russia’s VTB Bank, however its listings for Gazprom and Sberbank are still trading
  • MSCI and JPMorgan are considering removing all Russian securities from their indices
  • Trading on the Moscow Exchange (MOEX) remains suspended for the rest of the week
  • Euroclear has closed its Clearstream link for settling trades in Russian securities
  • The UK has launched a first tranche of sanctions against Belarusian individuals and organisations for their role in Russia’s invasion of Ukraine
  • EU ambassadors agreed on Tuesday to call for an initial assessment of Ukraine’s chances of becoming a member; the matter will be discussed at a summit in Paris on 10-11 March
  • The International Criminal Court (ICC) has opened an investigation into allegations of war crimes and crimes against humanity by Russia.
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