According to three sources familiar with the matter at hand, the Biden’s Administration has prepared a package of sanctions against Russia that includes blocking U.S. financial institutions from processing transactions for major Russian banks in an effort aimed at crippling Moscow’s ability to process international payments.
While earlier U.S. authorities ad said, restrictions on Russian banks would be part of a package of measures, the Biden Administration’s plan to cut correspondent banking ties, underpinning a cut to global money flow to/from Russia, has not been previously reported.
Furthermore, the Biden Administration has also said it will deploy its most powerful sanctioning tool against targeted Russian companies and individuals by placing them on its Specially Designated Nationals (SDN) list, which essentially bans them from accessing the U.S. banking system and freezes their U.S. assets, said sources.
The US Treasury Department and the White House declined comment.
According to sources, US sanctions would be dynamic and will change to the last minute, so as of now it is unclear who the US targets could be. However, the targeted Russian companies and financial institutions could be VTB Bank, Gazprombank, and Sberbank.
According to experts, while the threat of cutting off these financial institutions lack the punch of an SDN designation, the freezing of their US assets, could deliver a meaningful blow since it will make it difficult for them to transact in U.S. dollars, the global reserve currency.
“Since a significant number of global trade transactions are in U.S. dollars this is a sanction with bite, but without the more complicated and deadly sanction of being placed on the SDN list and having all assets in the U.S. or in the hands of U.S. persons frozen,” said Kay Georgi, a Washington-based lawyer who specializes in international trade.
The Biden Administration, which has almost daily predicted a Russian invasion of Ukraine, has threatened Moscow with tough banking sanctions in a its bid to deter it from invading Ukraine. Putin has so far denied plans to launch an attack on Ukraine.
“The goal of the financial sanctions is really to have short term upfront costs on Russia, to trigger capital flight, to trigger inflation, to make the Russian central bank provide bailouts to its banks,” said Peter Harrell, who sits on the National Security Council.
The Biden Administration’s warnings have however placed some U.S. financial firms on edge, said sources.
Tensions have been rife with Russia extending its military drills in Belarus, heightening Western fears over an imminent Russian invasion of Ukraine.
France has mediated a summit between Putin and Biden offering hopes that any potential conflict could be avoided.
The Biden Administration has been very aggressive in its rhetoric with Deputy National Security advisor Daleep Singh telling reporters that the United States will place a high cost to an invasion of Ukraine by Russia.
An invasion would be “immense, both to its economy and its strategic position in the world,” said Singh.