WASHINGTON --- The United States and Western allies sought to cripple Russia's banking sector and currency Saturday with an extraordinary set of sanctions punishing Moscow's invasion of Ukraine.
Taking measures unprecedented against a country of Russia's size and international stature, the allies cut selected banks from the SWIFT system, rendering them isolated from the rest of the world.
They hobbled the Russian central bank's ability to use reserves to support the already sinking ruble, which a senior U.S. official said will now "go into freefall."
And they warned that a task force will "hunt down" the "yachts, jets, fancy cars and luxury homes" owned around the world by oligarchs in President Vladimir Putin's ultra-wealthy inner circle, the U.S. official said.
Cut from SWIFT, the chosen Russian banks will not be able to conduct transactions without going back in time and using a fax machine or a telephone in every single instance -- effectively bringing their commerce beyond Russia to a halt.
The measures were backed by the United States, Canada, the European Commission, Britain, France, Germany and Italy. In a symbolic gesture likely to resonate in Moscow, which has been counting on European divisions to dilute Western fury over its Ukraine invasion, the stunning news was first delivered from Europe.
Far exceeding others imposed against Russia during Putin's two decades' long grip on power, the sanctions came as the Russian military stepped up its bloody, multi-pronged assault against Kyiv and other Ukrainian cities. Putin says the invasion is meant to restore control over a country that was long dominated by Russia but now wants to join Western institutions.
The group of world powers said in a statement it was "resolved to continue imposing costs on Russia that will further isolate Russia from the international financial system and our economies."
"We stand with the Ukrainian people in this dark hour. Even beyond the measures we are announcing today, we are prepared to take further measures to hold Russia to account for its attack on Ukraine," the statement said.
What is SWIFT?
Founded in 1973, the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, actually doesn't handle any transfers of funds itself.
But its messaging system, developed in the 1970s to replace relying upon Telex machines, provides banks the means to communicate rapidly, securely and inexpensively.
The non-listed, Belgium-based firm is actually a cooperative of banks and proclaims to remain neutral.
What does SWIFT do?
Banks use the SWIFT system to send standardised messages about transfers of sums between themselves, transfers of sums for clients, and buy and sell orders for assets.
More than 11,000 financial institutions in over 200 countries use SWIFT, making it the backbone of the international financial transfer system.
But its preeminent role in finance has also meant that the firm has had to cooperate with authorities to prevent the financing of terrorism.
Who represents SWIFT in Russia?
According to the national association Rosswift, Russia is the second-largest country following the United States in terms of the number of users, with some 300 Russian financial institutions belonging to the system.
More than half of Russia's financial institutions are members of SWIFT, it added.
Russia does have its own domestic financial infrastructure, including the SPFS system for bank transfers and the Mir system for card payments, similar to the Visa and Mastercard systems.
Are there precedents for excluding countries?
In November 2019, SWIFT "suspended" access to its network by certain Iranian banks.
The move followed the imposition of sanctions on Iran by the United States and threats by then Treasury Secretary Steven Mnuchin that SWIFT would be targeted by US sanctions if it didn't comply.
Iran had already been disconnected from the SWIFT network from 2012 to 2016.
Is it a credible threat?
Tactically, "the advantages and disadvantages are debatable," Guntram Wolff, director of the Brussels-based Bruegel think tank, told AFP.
In practical terms, being removed from SWIFT means Russian banks can't use it to make or receive payments with foreign financial institutions for trade transactions.
"Operationally it would be a real headache," said Wolff, especially for European countries which have considerable trade with Russia, which is their single biggest supplier of natural gas.
Western nations threatened to exclude Russia from SWIFT in 2014 following its annexation of Crimea.
But excluding such a major country -- Russia is also a major oil exporter -- could spur Moscow to accelerate the development of an alternative transfer system, with China for example.