Senators Urge Admin to Ban Russia From Global Financial System

Disconnecting Russian banks would greatly impact Kremlin’s economy

Vladimir Putin
Vladimir Putin / AP
September 24, 2014

A leading group of senators is pressuring the Obama administration to take greater action against Russian aggression in the Ukraine by sanctioning the Kremlin’s top banks and banning them from using the globe’s premier financial service.

Action of this sort would immediately damage Russia’s economy and send a strong message about the world’s opposition to the country’s illegal military action in the Ukraine, the senators said in a letter sent last week to Treasury Department head Jack Lew and obtained by the Washington Free Beacon.

The senators in their letter pushed the Obama administration and European Union countries to treat Russia like Iran by cutting off its access to the global monetary giant known as the Society for Worldwide Interbank Financial Telecommunications (SWIFT), an international monetary network that allows banks to easily transfer funds across the world.

Iran was banned from using the SWIFT service in 2012 due to its clandestine efforts to build a nuclear weapon. The exclusion significantly isolated the rogue country and greatly harmed its economy, leading the senators to advocate similar treatment of Russia.

"Why is SWIFT treating sanctioned Russian institutions differently from those in Iran?" asked Sens. Mark Kirk (R., Ill.), John McCain (R., Ariz.), Marco Rubio (R., Fla.), and several others.

Treating Russia as an international pariah, much as the globe has done with Iran, could send a clear message about Moscow’s rogue efforts in the Ukraine, Kirk said in a statement.

"Disconnection from SWIFT could have dramatic consequences for the Russian economy, just as it did for Iran in 2012 when international pressure forced SWIFT to cut off Iranian banks," Kirk said. "As long as Russia continues to threaten Ukraine's sovereignty, the U.S. and the E.U. must utilize all non-military means to make Russia pay a high price for its illegal actions and to deter Putin from further aggression."

While the EU has already imposed certain restrictions on at least five Russian banks, the senators said that more decisive action is required, including immediate and harsh action against Russia’s largest bank, Sberbank, which is alleged to have financed pro-Russian separatists in Eastern Ukraine.

"We urge you to impress upon your E.U. counterparts that even limited action by SWIFT would serve as an effective policy tool to advance U.S. and E.U. common goals to counter Russia’s unacceptable occupation and destabilization of Ukraine and to prevent further threats to European stability," the letter stated.

However, the EU and SWIFT appear to be treating Russia differently than Iran, despite sanctions against each nation being enacted in similar ways.

The senators noted that 14 Iranian banks were disconnected from the SWIFT system as a "direct result of international and multilateral action to intensify financial sanctions against Iran," as SWIFT’s then-CEO Lazaro Campos stated at the time.

"Please ask SWIFT to prove detailed legal reasoning as to the inconsistency in their policies regarding sanctioned Russian banks," the senators ask of Secretary Lew.

SWIFT’s own bylaws maintain that countries "not in compliance with applicable laws" could be tossed from the system.

The European parliament additionally approved a resolution last week that called on the EU to consider excluding Russia from nuclear cooperation talks, as well as the SWIFT system, according to reports.

The lawmakers said the Obama administration should "utilize all diplomatic options at your disposal to influence the European Union financial regulators to immediately exclude certain Russian banks sanction by the EU" from SWIFT.

It is currently unclear if EU officials have formally requested that the sanctioned Russian banks be removed from SWIFT.

The senators demanded answers on this front, telling Lew to find out the reasons why this has not yet happened.

They also suggested that the European Commission, a legislative body, investigate allegations that Sberbank and other Russian financial institutions have funded rogue efforts to undermine Ukrainian sovereignty, according to the letter.

Russia’s removal from SWIFT could have an immediate impact on its economy.

One Russian official recently speculated that expulsion from SWIFT could cause the Kremlin’s GDP to sink by 5 percent, a point the senators reiterate in their letter.

Other signers of the letter include: Kelly Ayotte (R., N.H.), David Vitter (R., La.). Jeff Sessions (R., Ala.), Pat Roberts (R., Kansas), Dan Coats (R., Ind.), and John Thune (R., S.D.).

Mark Dubowitz, executive director of the Foundation for Defense of Democracies (FDD), said that excluding Russian banks from SWIFT would send a "powerful message."

"Removing select Russian banks engaged in financial activities that contravene Swift's bylaws would be a powerful message to send to the Russian government that banking regulators won't permit financial institutions that threaten the integrity of the global financial system to access global financial networks," Dubowitz said.

A Treasury Department spokesperson declined to comment on the letter, citing a policy of not commenting on possible future action.