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West hits Russia with unprecedented sanctions, biggest banks targeted

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The Australian government has implemented a raft of sanctions on Russia, joining the UK and the US in an attempt to cripple Russia’s financial institutions.   

Australia has joined its allies in applying a whole raft of sanctions against Moscow, as Russia wages a full-scale military invasion of Ukraine.

Russia’s financial market was already feeling the consequences, having plunged 45 per cent in the early hours of the invasion, the ruble sitting at a record low against the US dollar.

On Friday, Prime Minister Scott Morrison announced a new round of sanctions, declaring repercussion for 300 members of the Russian Duma, who voted in favour of military action, and Belarus.

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The announcement came a day after PM Morrison said Australia would be joining the United States and Britain in targeting Russian banks.

As of Thursday, Australia has placed financial sanctions on an additional 25 persons and four entities “who have been responsible for the unprovoked and unacceptable aggression”, the PM said.

He had initially only imposed travel and financial sanctions against eight members of the Russian Federation’s security council and five entities.

“We will put restrictions on Australians investing in a further four financial institutions,” Morrison said, taking the total to nine.

“We will be working with like-minded countries on further consequences for Russia,” the PM added.

The sanctions are believed to include the country’s two largest banks, state backed Sberbank and VTB.

In the US, the government has announced unprecedented action, ordering local banks to sever their correspondent banking ties.

In a statement on Thursday, the US Treasury explained the real-world impact of these measures.

“On a daily basis, Russian financial institutions conduct about $46 billion worth of foreign exchange transactions globally, 80 percent of which are in US dollars.

“The vast majority of those transactions will now be disrupted.

“By cutting off Russia’s two largest banks  which combined make up more than half of the total banking system in Russia by asset value from processing payments through the US financial system.”

Moreover, the US Office of Foreign Assets Control has applied full blocking sanctions on VTB Bank and an additional three Russian financial institutions, Otkritie, Novikom, and Sovcom, effectively banning them from participating in the US financial system and freezing their US assets.

VTB’s response was almost imminent, with the bank seen taking a defensive approach and branding the sanctions “anti-Russian”.

“We have had time to learn the lessons and prepare for the most severe scenario, we have worked through several plans to counter the sanctions in ways which minimise the negative consequences for our clients,” it said.

In a slightly more professional manner, Sberbank assured that “all its systems and offices are working as normal”.

“Sberbank is closely studying new working conditions amid the sanctions related to correspondent accounts,” it said in a statement.

“Sberbank has all necessary resources, experience and expertise for successful operation in the current environment,” the bank added.

The UK has emulated the US, declaring the isolation and removal of essential Russian businesses from the British financial sector, including a freeze on all Russian bank assets in the United Kingdom.

Boris Johnson also announced a new swathe of export controls and vowed to freeze the assets of 100 Russian oligarchs.

“At the G7 meeting this afternoon, we agreed to work in unity to maximise the economic price that Putin will pay for his aggression, and this must include ending Europe’s collective dependence on Russian oil and gas that has served to empower Putin for too long. So I welcome again Chancellor Shultz’s excellent decision to halt the certification of Nord Stream 2,” PM Johnson told Commons on Thursday.

The European Union is also reportedly weighing up on removing Russia from the SWIFT transaction system.

West hits Russia with unprecedented sanctions, biggest banks targeted

The Australian government has implemented a raft of sanctions on Russia, joining the UK and the US in an attempt to cripple Russia’s financial institutions.   

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Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.

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