President Joe Biden’s administration has prepared an initial set of sanctions against Russia that includes banning U.S. financial institutions from processing transactions for major Russian banks, three people familiar with the matter said.

The measures, which would only be implemented if Russia invades Ukraine, are aimed at harming the Russian economy by severing “correspondent” banking relationships between targeted Russian banks and US banks that enable international payments.

While U.S. authorities have said the banking restrictions will be part of a possible sanctions package, the administration’s plan to cut correspondent banking relationships — which underpin global money flows — has not gone unnoticed. been reported before.

The US will also use its strongest sanction tool against certain Russian individuals and companies by placing them on the Specially Designated Nationals (SDN) list, effectively expelling them from the US banking system, banning their trade with Americans and freezing their American assets. , said the same sources.

The White House and the Treasury Department declined to comment.

The sources said the package could change until the last minute and it was unclear who the targets would be. However, they believe that major Russian financial institutions, including VTB Bank, Sberbank, VEB and Gazprombank, are possible targets.

Experts consulted by Reuters said that if the correspondent banking tool lacks the punch of an SDN designation, which freezes a bank’s assets, they could still deal a blow to target banks by making it difficult to transactions in US dollars, the world’s reserve currency. .

Much of world trade is conducted in dollars.

It’s unclear whether Russian banks would be added to the SDN list, but both types of sanctions could hit Russia hard.

“Given that a significant number of global business transactions are in US dollars, this is a biting sanction, but without the more complicated and deadly sanction of being placed on the SDN list and having all assets frozen. in the United States or in the hands of American persons,” said Washington attorney Kay Georgi, who specializes in international trade.

Sources noted that the administration could exempt certain transactions from the restrictions if deemed necessary.

‘INITIAL COSTS’

The Biden administration has for weeks been threatening tough banking sanctions against Russia in an effort to deter Russian President Vladimir Putin from invading Ukraine. Moscow has gathered more than 150,000 troops on Ukraine’s borders, but Putin has denied plans to launch an attack.

Peter Harrell, who sits on the National Security Council, said last month that “heavy financial sanctions” were part of a strategy to hurt Russia’s economy but spare its citizens.

“The purpose of financial sanctions is really to have short-term upfront costs for Russia, to trigger capital flight, to trigger inflation, to get the Russian central bank to provide bailouts to its banks” , he said in a speech late last month.

The stark warnings have put some U.S. financial firms on edge. Members of the financial services and payments industries have been in contact in recent days with the US Treasury Department’s Office of Foreign Assets Control, which administers the sanctions, sources said.

Tensions rose over the weekend as Russia extended military exercises in Belarus, heightening fears among Western powers of an imminent Russian invasion of Ukraine.

Biden and Putin agreed in principle to a summit on Sunday, France said, offering hope the conflict could be averted.

British Prime Minister Boris Johnson has said the United States and Britain will cut off Russian businesses’ access to US dollars and pounds if the Kremlin orders an invasion.

The Biden administration has been equally aggressive in its rhetoric. In a Friday briefing, Deputy National Security Adviser Daleep Singh told reporters that the cost to Russia of an invasion would be “huge, both to its economy and its strategic position in the world.”

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