Here is a summary of the impact of the sanctions already announced on banks and investors:
WHAT HAS BEEN ANNOUNCED SO FAR?
The US Treasury Department said it was targeting the “basic infrastructure” of Russia’s financial system, sanctioning two of its biggest banks – the state-backed Sberbank and VTB. Otkritie, Sovcombank and Novikombank, as well as some senior executives of public banks, are also on the sanctions list.
US banks must sever their correspondent banking ties – which allow banks to make payments to each other and transfer funds around the world – with Russia’s largest creditor, Sberbank, within 30 days.
Authorities in Washington have also used the US government’s most powerful sanctioning tool, adding VTB, Otkritie, Novikombank and Sovcombank to the list of Specially Designated Nationals (SDN). This measure had the effect of excluding banks from the American financial system, prohibiting their exchanges with Americans and freezing their assets in the United States.
American sanctions also target two Belarusian state banks – Belinvestbank and Bank Dabrabyt – because of the country’s support for the attack on Moscow.
The US sanctions came shortly after the UK government said it would impose an asset freeze on all major Russian banks, including VTB, and prevent major Russian companies from raising funds in Britain.
Russian banks will no longer be able to access sterling markets or clear payments, British Prime Minister Boris Johnson has said.
Britain also announced asset freezes and travel bans for members of Russia’s political and financial elite, including those who have long enjoyed London’s luxurious lifestyle.
More than 100 people, entities and subsidiaries will ultimately be sanctioned.
Previously, Britain had only imposed sanctions on three billionaires with close ties to Russian President Vladimir Putin and five relatively small creditors.
EU leaders have agreed on sanctions against Moscow that target 70% of the Russian banking market, European Commission President Ursula von der Leyen said on Friday.
However, few details were provided on the specific measures.
EU foreign ministers were due to meet in Brussels for an emergency session from 2pm GMT to iron out measures that were widely agreed to in principle overnight.
Earlier this week, EU leaders agreed to sanction 27 individuals and entities, including banks funding Russian decision-makers and operations in Ukraine’s breakaway territories, but not the biggest creditors.
Washington had imposed Promsvyazbank and VEB sanctions.
The United States had also tightened bans on Russian sovereign debt, which US President Joe Biden said would cut off the Russian government from Western funding.
WHAT NEXT?
Russia’s big banks are deeply integrated into the global financial system, which means that any sanctions against the biggest institutions could be felt far beyond its borders.
The US Treasury said Thursday’s sanctions would disrupt billions of dollars of daily foreign exchange trading by Russian financial institutions. Altogether, these institutions carry out approximately $46 billion in foreign exchange transactions, 80% of which are in dollars. “The vast majority of these transactions will now be disrupted,” the Commission said.
The sanctions target nearly 80% of all banking assets in Russia.
Sberbank said it was ready for any developments.
The VTB said it was preparing for the most serious scenario. “We have developed several plans to counter the sanctions in order to minimize the negative consequences for our customers,” she said in a statement.
Sovcombank, Otkritie and Novikombank did not respond to requests for comment. The Russian Embassy in the United States also did not immediately respond to a request for comment.
New sanctions that European leaders are about to announce are likely to include freezing Russia’s assets and cutting off its banks’ access to financial markets.
WHAT WOULD BE HARDEST TOUCH?
What Western banks and creditors fear most is that Russia will be banned from the global payment system SWIFT, which is used by more than 11,000 financial institutions in more than 200 countries.
Such a measure would hit Russian banks hard, but the consequences are complex. By banning SWIFT, European creditors would have a hard time getting their money back.
European leaders have chosen not to exclude Russia from SWIFT at this stage.
Britain’s Foreign Secretary, Mr Johnson, said on Thursday he intended to work with his allies to bar Russia’s SWIFT access. US President Biden has declared that this option remains possible.
Analysts say Russian institutions are better able to cope with sanctions than eight years ago, but that doesn’t mean they won’t hurt.
The Institute of International Finance, the largest international banking group, said US sanctions against Russia will have a huge impact on Russia’s economy and citizens and could trigger a recession.
WHICH FOREIGN BANKS ARE MOST EXPOSED?
Many foreign banks have significantly reduced their exposure to Russia since 2014, but several Western banks have been involved in transactions and have other relationships.
European bank stocks saw steep declines on Thursday, with an index of European banking stocks closing down 8.1%.
Banks with large operations in Russia were particularly hard hit, with Raiffeisen Bank International of Austria losing 23% and Socit Generale of France 12%.
Italian and French banks each had outstanding claims on Russia of around $25 billion in the third quarter of 2021, according to figures from the Bank for International Settlements.
Austrian banks had $17.5 billion. This figure is compared to 14.7 billion US dollars.