Russia becomes global, economic and financial pariah: White House

Russia has become a global, economic and financial pariah, a senior White House official has said, asserting that the government led by President Vladimir Putin is getting kicked off the international financial system as over 30 countries have announced sanctions and export controls on Moscow.

The US and its key allies have imposed tough sanctions on Russia to cripple its economy for invading Ukraine.

The leaders of the US, the European Commission, France, Germany, Italy, the UK and Canada on Saturday also decided to launch a joint task force to hunt down assets of sanctioned Russian companies and oligarchs.

Russia has become a global, economic, and financial pariah. Over 30 countries representing well over half the world's economy have announced sanctions and export controls on Russia. Putin's government is getting kicked off the international financial system, the senior administration official told reporters.

To be clear, this is a sad outcome for the people of Ukraine, the people of Russia, and many others. This is not where we wanted to be, but this is Putin's war of choice, and only Putin can decide how much more cost he is willing to bear. The United States and our allies and partners are unified and will continue to impose costs, said the official on condition of anonymity.

As part of the sanctions, the EU will implement a regulation that removes sanctioned Russian banks from the SWIFT international payments network, effectively shutting them out of the world's most important financial system.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the world's main banking messaging service which links around 11,000 banks and institutions in more than 200 countries, including India.

Based in Belgium, the system is considered central to the smooth functioning of global finances and Russia's exclusion from it would hit the country hard.

The reason de-SWIFTing is severe is that this is a network that almost all banks in the world use to transmit financial information to each other as they make payments or receive payments. The SWIFT code is on the bottom of every check you sign. About 11,000 banks across the world are members of the SWIFT network, the official said.

"If one of these de-SWIFTed Russian banks wants to make or receive a payment with a bank outside of Russia, such as a bank in Asia, it will now need to use the telephone or a fax machine. In all likelihood, most banks around the world will simply stop transacting altogether with Russian banks that are removed from SWIFT, said the official.

Secondly, the US and its allies have committed to target the Russian Central Bank - the single-most important financial institution in Russia.

"We are collectively planning to impose measures to ensure Russia cannot use its Central Bank reserves to support its currency and thereby undermine the impact of our sanctions, said the official, adding that this shows that Russia's supposed sanctions-proofing of its economy is a myth.

"The 600-billion-plus war chest of Russia's foreign reserves is only powerful if Putin can use it and without being able to buy the Ruble from Western financial institutions, for example, Putin's Central Bank will lose the ability to offset the impact of our sanctions. The Ruble will fall even further, inflation will spike, and the Central Bank will be left defenseless, said the official.

This coming week, the US and its allies will launch a multilateral transatlantic task force to identify, hunt down, and freeze the assets of sanctioned Russian companies and oligarchs -- their yachts, their mansions, and any ill-gotten gains that they can find and freeze under the law.

"We've already seen the impacts of transatlantic cooperation yesterday, when the French government seized a cargo ship owned by the sanctioned Russian bank Promsvyazbank, the official said.

In this week, the US has now targeted all 10 of Russia's largest financial institutions, holding nearly 80 per cent of the Russian banking sector's total assets.

We've cut off Russia's largest bank from the US financial system, a very significant blow to its ability to function and process global trade, the official said.

The export control measures we took in lockstep with allies and partners across the world, both in Europe and in Asia, will cut off more than half of Russia's high-tech imports, restricting Russia's access to vital technological inputs, atrophying its industrial base, and undercutting Russia's strategic ambitions to exert influence on the world stage, said the official.

According to the senior administration official, this has been the worst week for the Russian stock market on record.

"This has been the worst week for the Russian Ruble since March 2020, and the currency hit an all-time low against the Dollar earlier this week. Russia's government borrowing costs have more than doubled to almost 17 percent, said the official.

"The S&P credit rating agency has downgraded Russia to junk status. Within 24 hours of our actions, the demand for cash in Russia spiked 58-fold, according to reports, and the Russian government scrambled to deplete its own resources to try and shore up its banks and its currency, the official added.