Putins plans for Ukraine puppet Government to backfire spectacularly in Russia

Ukraine: Konotop residents reject Russia offer to surrender

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Western countries are excluding seven Russian banks from the SWIFT messaging system that underpins global payment transactions as the West ratchets up sanctions on Russia over its attack against Ukraine. The United States, Britain, Europe and Canada committed on Saturday to removing some Russian banks from the SWIFT payments system, potentially damaging Russia as well as its trading partners.

The EU on Wednesday named the banks it was excluding: Russia’s second-largest bank VTB, along with Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and VEB.

It is giving them 10 days to wind-down their SWIFT operations.

Sberbank, Russia’s largest lender, and Gazprombank have not been included in the list because they are the main channels for payments for Russian oil and gas, which EU countries are still buying. The two banks are subject to other measures, an EU official said.

EU leaders on Friday had agreed sanctions on Moscow that they said targeted 70 percent of the Russian banking market.

The bloc also imposed a ban on issuing bonds, shares or loans in the EU for refinancing Alfa Bank and Bank Otkritie, after freezing assets at Rossiya Bank, Promsvyazbank and VEB earlier last week.

Sberbank, VTB and Gazprombank do not face the EU asset freeze.

Refinancing in the EU of Russian state-owned enterprises is also forbidden, with the exception of some utilities. Securities settlement houses in the EU will not be allowed to serve Russian counterparties, with Euroclear and Clearstream saying they will not accept transactions in roubles.

Since Monday, the EU has also significantly expanded the list of people on its sanctions list. Numerous oligarchs can now no longer dispose of their assets in the European Union.

According to Stefan Kooths, vice president and economic director of the Kiel Institute for the World Economy, the Russian oligarch system is to blame for the fact that the huge country with its vast mineral resources remains so far below its economic potential.

It does not reward entrepreneurial innovation, but rather followership and good political behaviour, says Kooths.

Exploiting the raw materials is relatively easy. What is important for business is access to the resources and thus proximity to power. Developing new technologies or other economic sectors is more laborious than reinvesting the profits abroad.

According to Kooths, a decisive lever in the sanctions is that the Russian power and money elite now realise that they face worse times with Putin than without him.

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He told German daily Augsburger Allgemeine: “Even if Putin conquers Kyiv, installs a puppet government and controls Ukraine, the Western sanctions will not be lifted.

“Russia may be threatened with a guerrilla war and the oligarchs will have to ask themselves what they want to do with their billions.”

Perhaps China would then still be a contender for worthwhile foreign investments. “But the economic balance of power would then shift to Russia’s disadvantage,” Kooths added.

Kooths believes that a return to the old situation is hardly possible as long as Putin remains in power.

To promote a change of power in Russia, the West could even offer more than just the lifting of sanctions.

“You now have to find ways to signal that closer cooperation is also possible without Putin,” says Kooths.

But there is no guarantee that this will lead to success, he said.

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“Followers, opportunism and the repressive apparatus should not be underestimated,” he continued.

The US Treasury Department last week said it was targeting the “core infrastructure” of Russia’s financial system and sanctioning Sberbank and VTB. Also on the US sanctions list are Otkritie, Sovcombank and Novikombank and some senior executives at state-owned banks.

US banks must sever their correspondent banking ties with Russia’s largest lender, Sberbank, within 30 days. These links allow banks to make payments between one another and move money around the world.

Officials in Washington also wielded the government’s most powerful sanctioning tool, adding VTB, Otkritie, Novikombank and Sovcombank to the Specially Designated Nationals (SDN) list. The move effectively kicks the banks out of the U.S. financial system, bans their trade with Americans and freezes their US assets.

The US sanctions also target two Belarusian state-owned banks – Belinvestbank and Bank Dabrabyt – over the country’s support for Moscow’s attack.

The British government last week said it would impose an asset freeze on all major Russian banks, including VTB, and stop major Russian companies from raising finance in Britain.

Russia’s large banks are deeply integrated into the global financial system, and sanctions on the biggest institutions are already being felt far beyond its borders — the European arm of Sberbank has been forced to close after a run on the bank.

Additional reporting by Monika Pallenberg

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