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US considers sanctions on Russian banks

Financial Times

The Obama administration is considering placing Iran-style banking sanctions on selected Russian financial institutions if Moscow were to send troops into eastern Ukraine.

The banking sanctions are one of a series of measures that the administration has been discussing with Congress in recent days as it seeks to find ways to isolate Moscow diplomatically and economically, according to congressional aides and officials.

Banking sanctions are a powerful tool which take advantage of the US’s central role in the international financial system and which have helped place considerable pressure on the Iranian economy over the past two years. If a Russian bank were targeted, then any bank in the world that continues to do business with it can be cut off from the US financial system.

The banking sanctions are being examined as secondary series of measures, which are aimed more at deterring Russia from taking military action in eastern Ukraine. In response to the immediate crisis in Crimea, the administration is considering placing senior Russian officials on a visa ban and asset freeze list. The idea of broader trade and investment sanctions, which secretary of state John Kerry alluded to at the weekend, is only being analysed as a much more distant prospect.

The debate in Washington over what sort of economic tools to use against Russia comes amid some signs of friction between the US and Europe over how quickly – and how aggressively – to apply economic pressure.

European diplomats have expressed frustration that they are portrayed as dithering while the US is seen as decisive, when the stakes are far higher on their side.