West drops threat to Russian banks over Ukraine crisis

Europe and the US have shelved a plan to expel Russia from the world’s dominant international payments system if it invades Ukraine, it was reported yesterday.

The rhetorical heat rose on both sides of the stand-off yesterday as Jens Stoltenberg, 62, the secretary-general of Nato, warned of a “real danger” of war in Europe, and Russia said it would send more jet fighters, air-to-surface missiles and anti-aircraft guns to the alliance’s eastern frontiers for joint exercises with Belarus.

Moscow has already stationed more than 100,000 troops near Ukraine’s border, and one Russian minister said a larger deployment in Belarus could not be ruled out.

Jen Psaki, the White House press secretary, described the Russian drills in Belarus as presenting an extremely dangerous situation. “We’re now at a stage where Russia could at any point launch an attack in Ukraine,” she said.

So far all attempts at diplomacy have failed, though Antony Blinken, 59, the US secretary of state, will travel to Kiev today before visiting Berlin tomorrow and meeting Sergei Lavrov, his Russian counterpart, in Geneva on Friday. On the Nato side there is little agreement about how to punish the Kremlin in the event of an attack on Ukraine.

One “nuclear” option would be to kick Russia out of the Swift network, which handles transactions worth nearly £100 trillion a week between banks in more than 200 countries. This would effectively cut Russian banks off from the West overnight and starve the Russian financial system of access to dollar payments, as happened to Iran in 2018 and to North Korea the year before that.

However, some western governments worry that it could do serious damage to the economies of Germany and other European Union members that trade with Russia. A senior Russian official said last year that excluding Russia from Swift would be an act of “self-castration” by the West.

It might also undermine Swift itself by encouraging Russia and China to develop rival networks for payments. About 400 Russian banks and 20 per cent of Russia’s internal payments have already switched to Moscow’s own system, known as SPFS, which was created at the height of the last Ukraine crisis in 2014. The Swift idea has now been dropped in favour of targeted economic sanctions against large Russian banks, German officials told Handelsblatt, a business newspaper. However, the US National Security Council said that “no option [was] off the table”.

Dmitry Peskov, 54, President Putin’s chief spokesman, claimed Swift had previously said disconnecting Russia from its system would be “virtually impossible”. It was unclear what statement he was referring to.

Germany’s willingness to respond decisively to any Russian aggression against Ukraine came under the spotlight yesterday as Annalena Baerbock, 41, the German foreign minister, met Lavrov in Moscow. Baerbock said it was “hard not to interpret” the Russian troop movements as a threat.

Berlin is under pressure from allies to drop its refusal to deliver armaments to Kiev. The UK flew two planeloads of anti-tank weapons to Ukraine on Monday.