Tuesday

5th Jul 2022

Strategy to cripple Russian finances going to plan, says EU

  • “We have frozen the Russian central bank’s foreign assets and the and the rouble has collapsed,” EU vice-president Valdis Dombrovskis said. (Photo: ec.europa.eu)
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The European Commission on Wednesday formally laid out its strategy to cripple the Kremlin's ability to finance its war in Ukraine — and said it was working to plan.

"The rouble has collapsed," EU trade commissioner Valdis Dombrovskis told a news conference. "And we can go even further," he said.

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A key component of the strategy, carried out in coordination with the US and UK, is a freeze on the Russian central bank's foreign assets.

The idea is to hamper its ability to prop up the rouble, the Russian currency, which has lost around a third of its value over the space of a week.

The steps being taken "will lead to the paralysis of the Russian central bank," Bruno Le Maire, the French economy minister, told the news conference.

The rouble hit a record low of 110 roubles to the dollar at one point on Wednesday, before rebounding slightly.

Also Wednesday, the EU formally excluded seven Russian banks from the SWIFT messaging system that facilitates trillions of dollars worth of transactions every day.

Russian banks can still carry out cross-border transactions, but this will have to be managed by slower means, making a transaction much more time-consuming and costly.

The seven banks include Russia's second-largest bank VTB and VEB, which is actively financing war operations, according to EU officials.

Gazprombank and Sberbank will be excluded.

"We had to keep out Sberbank and Gazprombank because they are the two main banks related to managing energy-related products," said an EU official, referring to fossil fuel exports like gas on which many parts of Europe remain dependent.

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