Law360, London (February 27, 2022, 11:08 AM GMT) -- The U.S. and other Western governments have sharpened economic sanctions against Moscow in response to its invasion of Ukraine, cutting off selected Russian banks from the SWIFT global financial messaging system and blocking the country's central bank from liquidating assets held abroad. 

The new sanctions, announced late Saturday by the U.S., Canada, the U.K. and the European Union, came as Russian forces continued an assault on the capital Kyiv and other Ukrainian cities over the weekend. They were agreed after some EU member states reversed their opposition to tougher sanctions.

The measures are a sharp escalation in financial pressure on the Kremlin, aimed at cutting its access to Russia's external wealth and degrading President Vladimir Putin's ability to wage war.

"We are resolved to continue imposing costs on Russia that will further isolate Russia from the international financial system and our economies," the joint statement said. The new measures will be implemented "within the coming days."

The governments have yet to identify which Russian banks will be excluded from the SWIFT system, a secure messaging network that allows banks to make fast cross-border payments. The aim would be to disconnect them from the international financial system and harm their ability to operate globally. 

SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a Belgian-based financial messaging service supporting 11,000 banking and securities organizations, market infrastructures and corporate customers in more than 200 countries. 

The network is owned by a cooperative of global financial institutions and is a major provider of financing messaging and transaction processing services, particularly to clearing, payment and securities settlement systems, according to the European Central Bank.

SWIFT is particularly important in Europe, by far Russia's largest trading partner, where it is the message provider for a number of systemically important payment systems, including TARGET2, and securities settlement systems such as Euroclear and Clearstream, according to the central bank.

The weekend decision to ramp up the pressure with SWIFT exclusions marks a reversal to earlier opposition within the EU. Germany, Russia's biggest European trading partner, had initially opposed including a ban from the SWIFT system, fearing that a disruption in payment flows could also harm European access to key Russian exports of oil and gas, non-ferrous metals and wheat.
 
"Cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports," Ursula von der Leyen, president of the EU commission, said on Saturday.

Ukraine Prime Minister Denys Shmyhal tweeted late on Saturday that he was "grateful for our friends … for [their] commitment to removal of several Russian banks from SWIFT."

A SWIFT spokesperson said on Sunday that it is "engaging with European authorities to understand the details of the entities that will be subject to the new measures, and we are preparing to comply upon legal instruction."

Western government leaders said the second step in the latest sanctions, restricting Russian central bank access to its foreign reserves held abroad, will deprive Moscow of access to foreign assets. 

Central Bank of Russia statistics show the country claiming international reserves totaling $630.6 billion at the end of December, including $463.9 billion in convertible foreign currency reserves. These are mostly held on the books of major Western central banks such as the U.S. Federal Reserve, the European Central Bank and the Bank of England.

"We will stop Putin from using his war chest," von der Leyen added. "We will paralyze the assets of Russia's central bank."

In other moves announced Saturday, Western governments agreed to limit Russian access to so-called golden passports, or cash-for-citizenship programs that give oligarchs citizenship and access to Western financial systems.

Governments also plan to create a special task force to ensure the effective implementation of financial sanctions by identifying and freezing the assets of sanctioned individuals and companies in U.S., Canadian and EU jurisdictions.

The sanctions come after the U.K. government announced on Thursday a full asset freeze on VTB Bank, which is owned by the Kremlin, and a ban on Russian lenders having access to sterling and clearing payments in the U.K.

The British sanctions also prevent Russian state and private companies from raising funds in Britain through securities and loans. They also limit the amount of money that Russian nationals will be able to deposit in U.K. bank accounts.

Prime Minister Boris Johnson announced on Tuesday an initial set of asset freezes against five Russian banks and three oligarchs close to Putin. 

The EU agreed on Friday to a package of sanctions that will cut 70% of Russia's banking system off from the bloc's capital markets.

And U.S. President Joe Biden aimed sanctions on Thursday at major Russian financial institutions that account for almost 80% of all banking assets in that country, including VTB Bank and Sberbank. 

--Additional reporting by Daniel Wilson. Editing by Joe Millis.

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