The US government is working on sanctions against Russia that includes barring US financial services firms from transacting with major Russian banks, Reuters has reported, citing sources aware of the development.
The sanctions will lead to the snapping off the “correspondent” banking relationships between certain Russian banks and US banks that facilitate international payments.
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Russia will face these financial sanctions if it decides to invade Ukraine.
As per the report, the US authorities had revealed that the restrictions on banking activities will be a part of the possible sanctions. The decision to pull the plug on correspondent banking has not surfaced before.
The US could also restrict the banking activities of some Russian individuals and companies with US entities by placing them on the Specially Designated Nationals (SDN) list, the sources added.
President Joe Biden’s administration could change the sanctions at the last minute, the sources said, adding that it is not clear which Russian entities will be targeted.
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By GlobalDataThe sources also believe that VTB Bank, Sberbank, VEB, and Gazprombank could be the potential targets.
As against SDN designation, which freezes a bank’s assets, restrictions on correspondent banking are less severe but it could still make it tough for target banks to transact in US dollars, the news agency said, citing experts.
“Since a significant number of global trade transactions are in US 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 US or in the hands of US persons frozen,” said Washington lawyer Kay Georgi, who specialises in international trade.
