U.S. and European officials are finalizing an extensive package of sanctions if Russia invades Ukraine that targets major Russian banks, but does not include banning Russia from the SWIFT financial system, according to U.S. and European officials.
The sanctions on the table also include export controls on components produced by Russia for the tech and weapons sectors, and sanctions against specific Russian oligarchs, according to three sources familiar with the discussions.
One U.S. official said the Russian banks targeted with sanctions could include state-backed VTB and Sberbank, the largest financial institutions in Russia.
Both institutions are already subject to sectoral sanctions imposed by the Treasury Department after Russia annexed Ukraine's Crimea region that limit their ability to raise capital in the United States, but the full blocking sanctions in sight now would have far more significant consequences, said one sanctions expert.
They would likely be accompanied by certain waivers and wind-down periods to limit harm to U.S. companies and those of allies.
Three sources familiar with the talks said banning Russia entirely from the SWIFT financial transaction system was not under active consideration after running into major objections from European countries.
European lenders have expressed concern that banning Russia from SWIFT would mean that billions of dollars of outstanding loans they have in Russia would not be repaid.
Sanctions against major Russian banks would still have a significant impact on the Russian financial sector and economy, one of the sources said. VTB and Sberbank's share prices have been volatile in recent weeks, as investors worry Washington could ban Americans from holding debt or equity in the institutions.
"The goal is to design sanctions that would really hit the Russians while keeping an eye on the collateral damage to those imposing them, recognizing that sanctions would clearly hit Europe harder," said one of the sources.
U.S. officials said strong progress was made on the sanctions package during meetings with their counterparts in Germany, France and Britain this week.
The U.S. and European allies have focused on sanctions that would be imposed in the event of a physical Russian invasion of Ukraine, according to U.S. and European officials. They would need to coordinate further on any sanctions response short of a full military invasion, such as big cyber attack.
"A lot of the issues have been resolved," said one U.S. official familiar with the talks, adding, "I wouldn't say there's 100% agreement, but most of the concerns raised" by Germany in particular have been addressed.
Visiting German chancellor Olaf Scholz said in Washington Monday he was aligned with the United States on actions on Russia, but did not mention the Nord Stream 2 gas pipeline that the U.S. has vowed to shut of Russia invades.
Washington warned Friday that Russia is massing additional troops near Ukraine and an invasion could come at any time, perhaps before the end of this month's Winter Olympics.
(Reporting by Andrea Shalal; Editing by Heather Timmons and Alistair Bell)
