WASHINGTON — The Biden administration and key European allies announced on Saturday that they would remove certain Russian banks from the SWIFT financial messaging system, essentially barring them from international transactions, and impose new restrictions on Russia’s central bank to prevent it from using international reserves to undermine sanctions.
The actions, agreed to by the European Commission, Britain, Canada, France, Germany, Italy and the United States, represented a significant escalation in the effort to impose severe economic costs on Russia for its invasion of Ukraine.
“Russia’s war represents an assault on fundamental international rules and norms that have prevailed since the Second World War, which we are committed to defending,” the countries said in a joint statement. “We will hold Russia to account and collectively ensure that this war is a strategic failure for” President Vladimir V. Putin.
Ursula von der Leyen, the president of the European Commission, said that “cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports.”
Ms. von der Leyen said that the trans-Atlantic coalition would also try to cripple Russia’s central bank, which is flush with hard currency, by freezing its transactions and making it “impossible for the central bank to liquidate assets.”
The countries also took measures to put pressure on Russia’s elites. They said they would limit the sale of so-called golden passports that allow wealthy Russians who are connected to its government to become citizens of Western nations and gain access to their financial systems.
The announcement falls short of a blanket cutoff of Russia from SWIFT, which some officials see as a nuclear option of sorts. Such a move would have essentially severed Russia from much of the global financial system.
The targeted approach also means that Russia, at least for now, will still be able to reap revenue from its gas sales to Germany, Italy and other European countries.
Until the Russian military attacks began this past week, Germany and Italy had held fast in opposing a blanket ban on transactions with Russia, which would have cut off about 40 percent of the Russian government’s revenue. But in recent days, their posture has begun to change.
On Saturday, Germany’s chancellor, Olaf Scholz, announced that his government was approving a transfer of anti-tank weapons to the Ukrainian military, ending his insistence on providing only nonlethal aid, such as helmets.
At the same time, in a post on Twitter, Germany’s foreign minister, Annalena Baerbock, and its economy minister, Robert Habeck, acknowledged that the country’s government was now moving from opposing a SWIFT ban to favoring a narrowly targeted one.
“We are working intensively on how to limit the collateral damage of a disconnection from #SWIFT so that it hits the right people,” they wrote. “What we need is a targeted and functional restriction of SWIFT.”
European officials have said they have been in lengthy, sometimes tense discussions with American and British officials, who were pressing for a cutoff as soon as the Russian invasion of Ukraine began.
Understand Russia’s Attack on Ukraine
What is at the root of this invasion? Russia considers Ukraine within its natural sphere of influence, and it has grown unnerved at Ukraine’s closeness with the West and the prospect that the country might join NATO or the European Union. While Ukraine is part of neither, it receives financial and military aid from the United States and Europe.
Are these tensions just starting now? Antagonism between the two nations has been simmering since 2014, when the Russian military crossed into Ukrainian territory, after an uprising in Ukraine replaced their Russia-friendly president with a pro-Western government. Then, Russia annexed Crimea and inspired a separatist movement in the east. A cease-fire was negotiated in 2015, but fighting has continued.
How did this invasion unfold? After amassing a military presence near the Ukrainian border for months, on Feb. 21, President Vladimir V. Putin of Russia signed decrees recognizing two pro-Russian breakaway regions in eastern Ukraine. On Feb. 23, he declared the start of a “special military operation” in Ukraine. Several attacks on cities around the country have since unfolded.
What has Mr. Putin said about the attacks? Mr. Putin said he was acting after receiving a plea for assistance from the leaders of the Russian-backed separatist territories of Donetsk and Luhansk, citing the false accusation that Ukrainian forces had been carrying out ethnic cleansing there and arguing that the very idea of Ukrainian statehood was a fiction.
How has Ukraine responded? On Feb. 23, Ukraine declared a 30-day state of emergency as cyberattacks knocked out government institutions. Following the beginning of the attacks, Volodymyr Zelensky, Ukraine’s president, declared martial law. The foreign minister called the attacks “a full-scale invasion” and called on the world to “stop Putin.”
How has the rest of the world reacted? The United States, the European Union and others have condemned Russia’s aggression and begun issuing economic sanctions against Russia. Germany announced on Feb. 23 that it would halt certification of a gas pipeline linking it with Russia. China refused to call the attack an “invasion,” but did call for dialogue.
How could this affect the economy? Russia controls vast global resources — natural gas, oil, wheat, palladium and nickel in particular — so the conflict could have far-reaching consequences, prompting spikes in energy and food prices and spooking investors. Global banks are also bracing for the effects of sanctions.
But even some American officials had reservations about completely severing Russia. Among other concerns, they worried that it could strengthen alternatives to the SWIFT system that Russia and China have been developing. That could, over time, erode the United States’ ability to track and control payments.
Before the announcement on Saturday, U.S. and E.U. leaders were discussing how many and which Russian institutions to block, according to three European diplomats and another person familiar with the matter. Officials were deliberating about possible spillover effects and unintended fallout from the targeted restrictions.
The announcement did not specify which banks would be cut off from SWIFT.
SWIFT, a Belgian messaging service formally known as the Society for Worldwide Interbank Financial Telecommunication, connects more than 11,000 financial institutions around the world. It does not hold or transfer funds, but lets banks and financial institutions alert one another of transactions about to take place.
For weeks, the Biden administration publicly played down the notion of cutting Russia off from the system, suggesting that while all options were on the table, such a move could create more problems that it would solve.
But behind the scenes, American officials were pressing European allies to give some kind of indication to Mr. Putin that Europe was moving toward greater economic isolation of Russia, part of a larger containment policy.
Moreover, because SWIFT is a European organization, the United States has been allowing European countries to take the lead on the issue. The only unilateral lever that the United States could use would be to impose sanctions, or threaten them, on the SWIFT organization itself if it continued to transmit messages for Russian institutions.
Some experts on sanctions have argued that barring Russian financial institutions from SWIFT is overblown as a tool for punishing Russia, saying that strict sanctions on the country’s banks will have the same effect. However, others have argued that doing so would deal a blow to Russia’s financial sector and that choosing only a handful of banks to remove from the messaging system does not go far enough.
“A targeted cutoff would not achieve what is needed,” said Marshall S. Billingslea, who served as the assistant Treasury secretary for terrorist financing in the Trump administration. “They’ll simply reorganize the banking sector to put somebody else forward. The much more straightforward approach is to simply detach SWIFT from all of the Russian financial institutions.”
David E. Sanger and Alan Rappeport reported from Washington, and Matina Stevis-Gridneff from Brussels.