Boris Johnson has said it is time to “squeeze Russia from the global economy, piece by piece,” as he announced a wide-ranging sanctions package against Moscow, including freezing the assets of all major Russian banks and banning hi-tech exports.
“Putin will stand condemned in the eyes of the world and of history: he will never be able to cleanse the blood of Ukraine from his hands,” the prime minister told MPs as he announced the swingeing package of measures.
Pointing to sharp declines in Russian stock markets and the value of the rouble since the invasion of Ukraine, Johnson said, “we will continue on a remorseless mission to squeeze Russia from the global economy piece by piece, day by day and week by week.”
He had earlier tried and failed to convince fellow G7 leaders to shut Russia out of the Swift global payments system, though his spokesperson said he would continue to press the issue in the coming days.
Johnson announced 10 measures the UK was taking immediately. The assets of all major Russian banks in the UK will be frozen, including VTB, the country’s second largest bank with assets totalling £154bn.
Individual sanctions will be imposed on over 120 individuals, entities and subsidiaries, including Rostec, the country’s biggest defence company, which exports £10bn in arms a year, as well as four other defence companies.
Legislation is expected be tabled next week to ban major Russian companies from raising finance on UK markets and to prevent Moscow from raising sovereign debt in London.
Oligarchs who will be sanctioned include Putin’s former son-in-law Kirill Shamalov, Russia’s youngest billionaire; Denis Bortnikov, the deputy chair of VTB Bank’s management board; and Yury Slyusar, the director of the United Aircraft Corporation. The Russian airline Aeroflot will be banned from landing in the UK.
A diplomatic source said: “These are people who have international lifestyles. They come to Harrods to shop, they stay in our best hotels when they like, they send their children to our best public schools, and that is what’s being stopped.
“So that these people are essentially persona non grata in every major western European capital in the world. That really bites.”
What is it?
Swift (the Society for Worldwide Interbank Financial Telecommunication) is the main secure messaging system banks use to make rapid and secure cross-border payments, allowing international trade to flow smoothly. It has become the principal mechanism for financing international trade. In 2020, about 38m transactions were sent each day over the Swift platform, facilitating trillions of dollars worth of deals.
Who owns it?
Swift, founded in the 1970s, is a co-operative of thousands of member institutions that use the service. Based in Belgium, it remains neutral in trade disputes, being run principally as a service to its members.
Why would a Swift ban be so serious?
Boris Johnson told MPs it would harm the Russian economy if it was locked out of Swift. Run of the mill transactions would need to be conducted directly between banks, or routed through fledgling rival systems, adding to costs and creating delays.
Why is the US reluctant to effect a ban?
One reason is that the impact on Russian businesses might not be so serious. The head of a large Russian bank, VTB, said recently he could use other channels for payments, such as phones, messaging apps or email. Russian banks could also route payments via countries which have not imposed sanctions, such as China, which has set up its own payments system to rival Swift. A ban on Russia using Swift could accelerate a the use of China’s rival Cips system. There is also a fear that it could damage to the US dollar’s status as the global reserve currency, and accelerate the use of alternatives such as cryptocurrencies.
The UK will suspend and prohibit all dual-use export licences to Russia, which covers items that could have civilian or military use. There will also be legislation to prohibit a wide range of hi-tech exports to Russia, including semiconductors, aircraft parts such as Rolls Royce jet engines, and oil refinery equipment.
Number 10 said it would set out more detail in the coming days about new legislation to limit the deposits that all Russian nationals can hold in UK bank accounts to £50,000, intended to choke off the ability of Russians to raise finance and keep their money in London.
The measures will also apply to Belarus, which Russian forces have used to invade Ukraine. The government will also bring forward the economic crime bill, before Easter recess, aimed at making assets more transparent.
Labour leader Keir Starmer said his party would support the measures, saying the public would face “economic pain,” as a result, but “the British public have always been willing to make sacrifice to defend democracy on our continent and we will again”.
Johnson had faced criticism from across the political spectrum earlier this week for introducing sanctions that many MPs, including in his own party, felt were too weak.
Responding to Johnson’s statement on Thursday, former prime minister Theresa May said “every possible economic sanction” should be levied on Russia so it “absolutely feels the cold wind of isolation” and understood it had become a “pariah state”.
Jeremy Hunt, the former Tory foreign secretary, said economic sanctions would not go far enough and that a “fundamental review of our military capability” was needed, as well as a revisiting of the “out of date” Integrated review of the UK’s defence policy.
Some Conservative MPs called for the UK to increase military aid to Ukraine, including the former cabinet minister David Davis, who said the UK should consider providing air support to the Ukrainian armed forces.
Davis said that even the most “ferocious sanctions … are no longer a deterrent, they are a punishment” and that the invasion of Ukraine meant Vladimir Putin had “effectively declared war on the west”.
Full list of planned sanctions
1. An asset freeze on all major Russian banks, including VTB, the country’s second largest bank, which has assets of £154bn.
2. Legislation will be introduced to parliament on Tuesday that will prohibit the ability of all major Russian companies to raise finance on UK markets, and for the Russian state raise sovereign debt on UK markets. The aim is to pass the legislation in one day.
3. A set of individual sanctions on over 100 individuals, entities and subsidiaries, when also counting the measures unveiled on Tuesday. The new targets include the Russian state-owned defence giant Rostec, its subsidiaries, and a group of oligarchs seen as particularly close to the Kremlin. These are:
Kirill Shamalov: Russia’s youngest billionaire and Vladimir Putin’s former son-in-law.
Petr Fradkov: head of Promsvyazbank, one of the banks sanctioned, and the son of the former head of Russia’s FSB intelligence service.
Denis Bortnikov: deputy president and chair of VTB bank.
Yury Slyusar: head of Russia’s United Aircraft Corporation.
Elena Georgieva: board chair of Novikombank.
More people will be named in the weeks to come. The individuals will be banned from all UK transactions – meaning those with children in UK private schools will be unable to pay future fees. Relatives will not, however, be sanctioned personally.
4. Immediately ban the ability of Russian airline Aeroflot to land in the UK.
5. An immediate suspension of all dual-use export licences to Russia. This covers items that could have a civilian or military use, such as electrical components and truck parts.
6. In the coming days, legislation to prohibit a wide range of hi-tech exports, and the export of equipment connected to extracting oil and gas. This is being done in concert with the US.
7. Looking into a way to limit the amount of deposits Russian nationals can hold in UK bank accounts. The details have to be decided, and also whether this will cover dual nationals.
8. A plan to work with allies to shut off Russia’s access to the Swift international banking system. This would have a major impact, but can only be done effectively if other countries agree.
9. Extending the full range of sanctions to Belarus, given the integration of the nations’ military forces.
10. The UK’s economic crime bill, which will strengthen areas such as unexplained wealth orders, will be brought forward. On Wednesday Boris Johnson had told MPs the bill would not be brought to the Commons this parliamentary session.
