The United Kingdom will push the European Union this weekend to consider the most punitive sanctions yet against Russia for its involvement in escalating the crisis in Ukraine.
According to Bloomberg, the U.K. plans to propose blocking Russia from the SWIFT banking transaction system, a move analysts say would effectively cut off Russian businesses from the rest of the world’s financial system. U.K. Prime Minister David Cameron will put forward the proposal during a meeting with E.U. leaders in Brussels on Saturday.
“This would be a major escalation of the sanctions. Most international payments flow through SWIFT. Banning Russian banks and companies from SWIFT would effectively cut off Russian businesses from the rest of world,” said Bruce Johnston, a London-based analyst at Morgan, Lewis & Bockius.
“It would also have a major impact on European businesses who need to paid by Russians, and want to consume Russian energy.”
The move would have a significant effect on Russia’s banking sector, as many financial institutions across the world use the system. According to SWIFT’s website, it transmitted more than 21 million financial messages per day in July. It helped process payments among more than 10,500 financial institutions and corporations across 215 different countries.
Mark Dubowitz, the executive director of the Foundation for Defence of Democracies, compared the potential move to one leveled on Iranian institutions in 2012.
“SWIFT is the electronic bloodstream of the global financial system,” he told Business Insider in an email. “Cancelling Putin’s credit card could have far reaching consequences for the Russian economy as Iran discovered when scores of its financial institutions were expelled from SWIFT in 2012.”
The U.S. and E.U. have imposed multiple rounds of sanctions on Russia over the conflict in Ukraine. Most recently last month, they leveled targeted sanctions on Russia’s energy, arms, and finance sectors. But so far, the sanctions have not changed the calculus of Russia or President Vladimir Putin.
This week, the conflict has sharply escalated, as Ukraine, NATO, and the West said Russia sent troops across the border to fight with pro-Russian separatist rebels in eastern regions of the country.
This week, the rebels have opened a new front in the cities of Amvrosiivka and Starobeshevo. One fear is that Russia is attempting to create a land link between Russia and the strategic peninsula of Crimea, which Russia annexed with special forces troops in March. Poroshenko said Russian troops are leading a separatist counteroffensive in the east, bringing in tanks and firing artillery from inside Ukrainian territory.
President Barack Obama and European leaders have agreed on the need for new “costs” in the wake of the latest escalation, but officials in both areas are questioning the legitimacy of the strategy. In the U.S., multiple Republican lawmakers have called on Obama to provide military assistance to Ukraine, saying a political resolution to the conflict is not possible if Russia continues to pursue its goals through military means.
In Europe, geopolitical expert Ian Bremmer of the Eurasia Group told Business Insider he expected there to be high-profile breaks among leaders on the sanctions strategy.
“It’s hard to see the west holding off for much longer in not calling Russian forces an invasion. That leads to more ‘level 3’ (sector wide) sanctions on Russia, yes, but we’ll now see a real fragmentation of European leaders publicly calling the policy a failure and looking to break from further coordination,” Bremmer said.
“After all, many Europeans have been deeply sceptical of Russian sanctions from the beginning, and to the extent that the purpose of sanctions was to prevent an invasion. That’s clearly failed.”
Senior Obama administration officials declined to comment about possible new sanctions on Russia during a conference call with reporters Friday about new sanctions leveled on individuals and businesses in relation to Iran’s nuclear program. An administration official did not immediately respond to a subsequent request for comment.
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