Month: February 2022

After crashing at the Sunday night open – erasing all of Friday’s melt-up – US equity futures have staged their ubiquitous rebound (though still remain notably lower). Through SpotGamma’s options lens, the market has just simply reverted back to equilibrium after a strong short cover rally.

Crucially however, Nomura’s Charlie McElligott warns that the focus in coming-days will likely be in the financial system “plumbing,” where we are seeing expected signs of risk-off – but certainly no current “stress” – in USD funding space, as markets wait for the first fallouts of the Russian liquidity lockout:

Front-end FRA-OIS gapped meaningfully (USFOSC1 +8bps initial), x-currency basis swaps widened (EUBSC -20, EUXOQQC -20, JYBSC -14 – more negative means “more expensive” to borrow Dollars through FX swaps than domestically)…

…and front Mar / Apr ED$ contracts underperformed the rest of the curve contracts (EDH2EDM2 -10 initial), as these markets are beginning to reflect increased demand for- / cost of- Dollar funding…

…but I’d say more anticipatory than anything else at this juncture (so far this morning, no abnormal flows in US bills or repo as of yet)

But for now, the Nomura cross-asset strategist is “watching and waiting”?  

Because something, somewhere within the global banking ecosystem will most likely inevitably “break” off the back of the Russian SWIFT exclusion and frozen Bank of Russia assets—potentially in the form of transactions related to the sprawling Russian commodities trade, perhaps with a European subsidiary of a Russian bank being unable to pay liabilities as these “knock-on” throughout the system

To this point on funding stress and who is housing the risk (and as opposed to the pairing of losses in US Eq Index futures), SX7E (EU Banks) has not really bounced at all overnight and remain parked near lows, -6.0%ish with a number of large entities down double-digits on the session (and SX7E -20% in 3 weeks).

Perhaps this is why US Equities are now bouncing off earlier lows this morning… as that “end of US exceptionalism” trade that saw folks unwinding into Europe and R.O.W. DM just a few weeks ago – including EU Banks – now reverses again, and money flows back into US assets.

The big “what if?” observation from CS Zoltan’s provocative Sunday piece that has folks talking was the POSSIBILITY we could see headlines soon on Fed daily swap-line activation – hence a key dynamic to watch for in coming-days would be any large decrease in usage of the Fed’s o/n RRP facility, as a sign that the Street is tapping the $1.6T in reserves, in the case that, say, a correspondent were to mush repo markets with collateral (even before QT were to begin).

And I think this stasis around waiting for potential core “plumbing” issues which could see this “geopolitical matter turn systemic” (as well as any new military and / or negotiation updates out of Ukraine) is why Markets and Vol are kinda in no-man’s land overnight (who trades the Sunday reopening, anyhow?!).

The doiminating theme in equity vol-land remains demand for super short-dated (0-5 DTE) Puts.

McElligott says this will continue to remain a driver of persistent “Short Gamma” trading dynamics which we struggle under, as it siphons from supporting market depth in futures / ETFs / singles, because Dealers turn from (Long Gamma) “liquidity makers” into (Short Gamma) “liquidity takers”.

The ongoing Equities index option Dealer “Short Gamma” environment most obviously created these now daily “overshoots” in both directions, via accelerant hedging flows which “presses” into moves both higher and lower with persistent and larger 1d high-low ranges…instead of the halcyon days of the prior legacy “Long Gamma” regime, where Dealer flows would stabilize markets through liquidity injection, “insulating” or “buffering” large sell-offs with bids, or impulse rallies with offers.

However, as SpotGamma notes, Friday’s expiration did serve to reduce the total amount of negative gamma across the S&P/QQQ.

Therefore, while markets should remain volatile, they should have less movement compared to the extreme moves of last week.

McElligott believes it continues to feel like bounces in US Equities for the foreseeable future likely remain viewed as “rentals” from tactical traders playing short-term positioning and flows (“bear market rallies” on mechnical hedge flows and covering / short-squeezes) and not-yet that “buyable dip,” until we begin clearing the initial Fed liftoff and learn more about plans for the balance-sheet – both of which will act to shrink the distribution of future outcomes and help to suppress volatility thereafter (on top of the backtest of prior “impulse tightening” cycles from the Fed–4 hikes or more first 12m of a liftoff cycle–where on the median, we stabilize nicely in risk t+6m and then broadly rally out +12m).

In the meantime however, ongoing risk of “upside volatility” from US inflation data in the midst of this current “peak” territory – and still “too easy” FCI (Real Yields collapsing deeply more negative in recent days, while Credit Spreads relatively underwhelming from a long-term widening perspective) – remain huge headwinds for the FOMC, who are confronted by consumers at home facing down real price duress and politicians who are focused on this as “the” stress point into US midterm elections later this year.

Hence that idea that the Fed is “selling Calls” in Equity overhead strikes anytime in the next few months if we were to reapproach prior Equities highs – as that would perversely imply an “easing” in FCI which would be counterproduct to said Fed efforts to rein-in inflation from the demand side – hence clients remain comfortable “selling the rips” for these next 2-3 months, until we can then clear the inflation peak and reprice hawkish Fed “behind the curve” left-tails which ultimately sees us move to the “post-tightening” regime and actually look towards a more market-friendly “Goldilocks” economic backdrop, as Fed “easing” then becomes the “next trade”.

By Michael Every of Rabobank

The fight is here: I need ammo, not a ride

This will be a longer than normal Daily: we live in extraordinary times and a few extra paragraphs are needed to cover it. However, let’s start with the key point: Vladimir Putin has lost this war – and so have markets. The greatest risks lie in how much damage he is prepared to inflict on to attempt to deny that fact.

The ferocity of Ukrainian resistance is the polar opposite of the collapse of the Afghan government, which exited in jets filled with US cash. On Friday, as Bloomberg was reporting Kyiv would fall in hours, the US offered President Zelenskiy an airlift out. His response: “The fight is here: I need ammo, not a ride.” He is prepared to die for his cause, in contrast to leaders who won’t even risk a bad opinion poll. Zelenskiy’s people have rallied to him – as will a new foreign legion of volunteers from abroad. One Twitter meme doing the rounds is that “Kyiv is willing to consider NATO membership of Ukraine.” Any dreams Putin had of imposing a puppet regime, or of carving up and holding Ukraine, have been shattered by cries of “Slava Ukraini!” (Glory to Ukraine!).

Overall, the Russian military is performing extremely poorly: they still don’t have air superiority due to Ukraine moving its air defences around, and Russian missile strikes having only hit old, static targets. Russia’s attempts to rapidly seize Kyiv while minimising losses to Ukrainian civilians and its infrastructure are resulting in massive losses on their side. According to the Ukrainians, as of Sunday Kyiv claimed to have taken out: 540 IFVs, 16 airplanes, 18 helicopters, 102 tanks, 504 APCs, 1 Buk-1 system, 20 armoured cars, and 5,000 soldiers. The latter is a third of the total losses suffered in the entire Soviet-Afghan war (1979-89).

There are now reports of Russian conscripts looting or begging for food or fuel, which suggests supply chain collapse; of them pouring fuel away to not be able to drive on to Kyiv; and of mutinies. It seems the Russian army, despite lavish budgets, has rotted away below an elite tip due to corruption and yes-men needing to please the unwavering ideologue at the top rather than pointing out that things are not going well. If so, Putin’s profoundly anti-Western regime ironically displays the same institutional failures –and flawed supply chains– his fans in the West bewail as our own peculiar failure. Rumors are that Russia’s top general, Gerasimov, has been fired.

However, at time of writing Putin‘s troops were finally taking towns in the East and gaining key ground in the south, with new attacks apparently underway on Odessa. Moreover, there were fears Russia and Belarus would double down to try again for Kyiv, and/or to seal the Ukrainian border with Poland and Slovakia to stop supplies coming in from the West, which will raise the risk of clashes with NATO.

If Putin wants to win militarily he will have to get even more destructive; yet the more he does, the more Ukrainians and the West will resist. War is a continuation of politics by other means. There is no political means by which Putin can reintegrate Ukraine with Russia: he has irretrievably broken the ‘Russkiy mir’ (Russian world) he wanted to recreate. Some now start to fear Putin may decide if he cannot hold Ukraine then he will cause massive damage in order to punish it for its defiance.

Yet if Putin has lost, so have markets. The relief rally on Friday was due to two factors besides options covering: 1) Ineffective Western sanctions, as besides food and energy not being touched, the lack of seriousness was seen in Europe seeking carve-outs for the likes of Gucci and Prada (Italy) or diamonds (Belgium); and 2) The view Russia would win rapidly, exemplified by Ukraine’s ambassador to Germany telling the press ministers he had talked to told him “You Ukrainians have only a few hours left. There is no point in helping you now”. Yet Zelenskiy’s defiance undermines point 2 and has captured the Western public’s heart such that its leaders have now reversed point 1.

First, Europe has woken up from a 30-year geopolitical slumber. Ukraine will be resupplied militarily by NATO members and the EU – including sending military aircraft, and within hours. Previous holdouts like Germany and the Netherlands will send Stinger missiles. There has been a total reversal of the past 30-years of German policy: Berlin will raise its defence spending to more than 2% of GDP, put this in its constitution, and initiate an immediate EUR100bn defence fund, while building more LNG terminals and renewables to diversify away from Russian gas. Presumably other low-defence spending EU/NATO members will follow. Even Cold War neutral Sweden is sending military assistance (and Kosovo, like them and Finland, is considering NATO membership). In short, despite possible upcoming Russia-Ukraine negotiations, this war is far from over, and is likely to get uglier ahead.

Second, Russia is being removed from the global community, economy, and financial markets.

Culturally:

• Russia is no longer wanted in the FIFA football World Cup, with other countries not willing to play against it, and has lost the right to host the Champions League final, F1 racing, and even the Eurovision song contest.

• TV station Russia Today and Sputnik News radio have seen a slew of resignations and been banned from the EU, as well as demonetised on social media.

Politically:

• Russia has been kicked out of the Council of Europe – prompting former President Medvedev to say it no longer needs diplomatic relations with the West and, chillingly, is now free to reintroduce the death penalty.

• Kazakhstan refused to send troops to support Russia despite Moscow just having saved its regime from unrest.

• We are seeing a wave of de-Putinisation, as previously sympathetic politicians scramble to revise their views. (Although in the US, where the atmosphere has been poisoned more by Russiagate, conservative commentator Dinesh D’Souza proclaimed in a binary choice of the liberal establishment over Putin, he would still opt for Putin.)

• The UN Security Council will hold a rare emergency special session of the 193-member General Assembly on Russia’s invasion of Ukraine today.

Economically:

• Russia already faces strict technology export controls.

• Now the EU are refusing to export to or service Russia’s fleet of Airbus planes, which will soon see them grounded; the EU, and Canada, will not let Russian flights in; and Russia will not let Western flights through its airspace – so expect longer, pricier flights to hit freight and tourism hard, again. The train tracks from Russia to Europe via Ukraine have been dynamited, so no goods can flow. Trucking to Russia may be halted by Poland and Slovakia. The Black Sea is effectively closed, following a slew of attacks on civilian shipping. There was even a brief moment where it appeared Turkey would close the Bosporus to Russian shipping – it still can according to the Treaty of Montreux if it announces it feels threatened. Russian commercial ships are also being seized under sanctions.

• A slew of oligarchs have been sanctioned, as have Putin and Foreign Minister Lavrov. The White House has declared: “This coming week, we will launch a multilateral Transatlantic task force to identify, hunt down, and freeze the assets of sanctioned Russian companies and oligarchs – their yachts, their mansions, and any other ill-gotten gains that we can find and freeze under the law.”

• Key energy exports are still being left untouched – but don’t think Russia may not turn off the gas as its own weapon.

• The EU must be ready to expect more than 7m Ukrainian refugees, the European commissioner for humanitarian aid and crisis management, Janez Lenarcic, said after a special meeting in Brussels on Sunday.

Financially:

• There were already US and EU blocks on certain Russian banks, and now there is a partial SWIFT ban for almost all Russian banks – although exactly which and over what time period is still unclear. This excludes energy trades, but reportedly many are walking away from contact with Russian oil in case further sanctions hit in the next few days. Effectively, lines of communication between Russian banks and the rest of the world, and Russia is being placed in the same camp as North Korea, Venezuela, and Iran.

• BP is walking away from its 20% stake in Rosneft, taking a write-down of $25bn in doing so, and Norway’s sovereign wealth fund is dropping Russian assets.

• China, whose public has been pro-Putin on social media, is complying with sanctions so far.

• The $620bn-plus in FX reserves held by the Central Bank of Russia (CBR) are sanctioned too – meaning that apart from the gold and only partially-convertible CNY it holds, the vast majority are now unavailable. Even the gold is not liquid if nobody can use FX in exchange for it. There will be a complete collapse in the rouble today, with a 20% drop at the open and nothing to support it from that point onwards.

• The expectation is runs on Russian banks and perhaps the worst economic and financial collapse since 1991, when the USSR was dissolved.

• The CBR has already declared that it will not allow foreigners to sell Russian assets, so we effectively have frozen markets/capital controls, as we feared would be the case.

• Belarus will also be sanctioned by the EU.

• Even neutral Switzerland will sanction Russia.

So, we have the likelihood of a protracted war in Ukraine, including across the key grain ports of the south; massive economic and financial damage in Russia; spillovers into the real economy globally; a remaining risk that Russia turns off the energy taps; and finding out what being forced out of the US/global financial system really looks like – for the world’s largest nuclear power. A key tail risk is that a paranoid Putin will see this as the foreign interference he already stated would entail terrible consequences. Indeed, Russia’s nuclear deterrent was just raised, suggesting the nuclear blackmail flagged as a worst-case scenario on Friday – though Russian experts flag this only meant an increase from 1 to 2 in a 4-stage alert system so far. Yet Belarus has also announced it is rejecting its former non-nuclear status and will hence host Russian nukes, changing the regional strategic balance.

Even if one wants to look at just macro indicators, the German defense/fiscal policy shift is likely to have an important economic and monetary policy impact in line with the analysis we put forward in ‘Ich Bin Ein Berliner’(?) That is on top of the rising risks of the ‘Scenario B’ portrayed in our recent report on Ukraine (‘How we Would Pay for the War’): far higher inflation for far longer, and far lower growth – and against a backdrop where wage pressures are already rising and we are moving closer to ‘war economies’ -at least in rhetoric, though Covid spending hit the equivalent levels. Central banks were already stuck on the horns of a damned-if-you-do-damned-if-you-don’t policy dilemma: the probability of either biting deflation or choking stagflation just increased – and that is not the primary concern for our leaders for obvious reasons.

Moreover, as the West gets back into the frame of mind for defense, decoupling, sacrifice, and self-reliance for its values, will it really end with Russia, or will it begin to *peacefully* extend to other potentially irredentist and revanchist powers to prevent any such future crises now? Markets really won’t like that.    

The initial market reaction at the start of the Asian open has been relatively moderate all things considered: Brent oil up 6%, Aussie 10-year bond yields down 10bp, and 10-year US 10s down 6bp, while S&P Futures are down 2.5%, the US dollar up, and EUR the under-performer among the G-10. However, there is a long, long way to go.

The fight is here: the West needed ammo, and it won’t give markets an easy ride.

Following in the footsteps of Europe, on Monday the Biden administration banned U.S. people and companies from doing business with the Bank of Russia, the Russian National Wealth Fund and the Ministry of Finance. The moves by the U.S. Treasury’s Office of Foreign Assets Control will “effectively immobilize” any Russian central bank assets held in the U.S. or by U.S. nationals, according to a Treasury department statement.

According to the Treasury release, the U.S. also announced new penalties on a key Russian sovereign wealth fund, the Russian Direct Investment Fund, and its Chief Executive Officer, Kirill Aleksandrovich Dmitriev, a close ally of Russian President Vladimir Putin. The announcements marked the latest blow in the West’s financial retaliation against Russia following Putin’s invasion of Ukraine and are designed to shake an already staggering Russian financial system.

“The unprecedented action we are taking today will significantly limit Russia’s ability to use assets to finance its destabilizing activities, and target the funds Putin and his inner circle depend on to enable his invasion of Ukraine,” Treasury Secretary Janet Yellen said in a statement.

The U.S. and EU blocks on the Russian central bank’s assets will immobilize nearly half of Putin’s warchest, according to a Treasury spokeswoman. Roughly 13% of the central bank’s reserves are held in China, she said.

Putin’s warchest is an estimated $630 billion in reserves, the officials said, and the measures are aimed at blocking his ability to sell those to mitigate financial pressure domestically. Russia’s own data published in January shows that $100 billion of the reserves were held in U.S. dollars as of June, however as Zoltan Pozsar noted overnight, there is over $200BN in swaps.

The US move comes two days after the U.S., U.K., Canada and the EU said they would block major Russian banks from SWIFT, take steps to stop Russia’s central bank from rescuing the nation’s economy and move to seize Russian oligarchs’ yachts and residences in the West. The U.K. Treasury said earlier Monday it will act immediately to stop people and companies doing businesses with the Bank of Russia, the Russian National Wealth Fund and the Ministry of Finance. The moves to isolate Russia from the global economy came after an initial round of penalties failed to persuade Putin to withdraw his forces from Ukraine.

In consideration for those European nations who remain hostage to Russian gas exports, the U.S. separately issued a license allowing certain energy transactions with the central bank, a carve-out a senior administration official said is aimed at minimizing the fallout in Europe and energy markets. Still, it will take time for Russian institutions to figure out how to segregate energy transactions from other measures, the official said.

Commenting on the US sanctions, former State Department staffer Eddie Fishman tweets the following:

it looks like these are essentially blocking sanctions. (There are technical differences, but the effect is the same—”any transaction” with the CBR is prohibited.) The CBR will be unable to intervene in FX markets to prop up the ruble, full stop.

The US directive also applies to Russia’s National Wealth Fund and Ministry of Finance. Consequently, the action renders ALL of the Russian government’s rainy day funds inert. It is comprehensive. (SOEs aren’t included, but their FX holdings aren’t nearly as large.)

This is a sanctions action without precedent. As a result, the specific consequences aren’t easy to predict with a high level of confidence. But the consequences will certainly be far-reaching. And it took a whole lot of courage for the US and Europe to take this step.

Meanwhile, as Bloomberg notes, the US is continuing to work with European Union partners to finalize the list of banks that will be cut off from the SWIFT system, a second senior administration official said. The list of banks will be finalized by the EU because SWIFT is under Belgian authority. U.S. officials are monitoring Belarus’s role in the Russian invasion, and that country will also face further consequences if it continues to aid and abet Russia, one of the officials said.

In response to the barrage of sanctions, the Bank of Russia acted quickly to shield the nation’s $1.5 trillion economy from the sweeping penalties, more than doubling its key interest rate to 20%, the highest in almost two decades, suspending equity markets and imposing some controls on the flow of capital.

The IIF’s Elina Ribakova made the following comments in response to the BoR’s actions:

2/ Capital controls:
– measures to prevent capital flight by non-residents (starting with a ban on divestment from fin. assets)
– 80% export proceeds

— Elina Ribakova 🇺🇦 (@elinaribakova) February 28, 2022

4/ Regulatory support measures (~900bn positive impact on bank capital)
– no mark to market
– no provisioning
– restructure debt
– release all capital buffers
– no open FX position for sanctioned banks

— Elina Ribakova 🇺🇦 (@elinaribakova) February 28, 2022

5/ Domestic payments systems are function. Domestic alternative to SWIFT and domestic alternative to Visa/Mastercard. pic.twitter.com/rpgLUTni5J

— Elina Ribakova 🇺🇦 (@elinaribakova) February 28, 2022

Meanwhile, calculating the capital flight out of the domestic banking system, Ribakova writes that individuals took out $10 billion (1 trillion RUB) in case from the Russian banking system in just the past few days:

Individuals took out more than 1 trillion (10bn) in cash from the Russian banking system in just over a few days. https://t.co/301bskzlBq

— Elina Ribakova 🇺🇦 (@elinaribakova) February 28, 2022

As reported last night, facing the risk of a bank run, a rapid sell-off in assets and the steepest depreciation in the ruble since 1998, policy makers banned brokers from selling securities held by foreigners starting Monday on the Moscow Exchange.

The ruble continued to plunge against the dollar, with the currency losing a third of its value in offshore markets at one point Monday, hitting an all-time low of 109 per dollar in Moscow before recovering some losses and was last trading around 98.

The announcements came as a Ukrainian delegation led by the defense minister began talks with Russian officials. Ukrainian President Volodymyr Zelenskiy has voiced skepticism that the talks, taking place on the country’s border with Belarus, would yield results but said he was willing to try if it meant any chance of peace.

Authored by Naveen Anthrappully via The Epoch Times,

Russia’s invasion of Ukraine has triggered boycotts in the United States, with governors of four states seeking to limit the sale of Russian products, mostly vodka.

“I’ve asked the members of the Texas Restaurant Association, Texas Package Stores Association & all Texas retailers to voluntarily remove all Russian products from their shelves. Texas stands with Ukraine,” Texas Gov. Greg Abbott, a Republican, said in a Feb. 27 Twitter post.

The Texas Restaurant Association said that they “stand ready” to help businesses find alternatives to Russian imports and announced “solidarity” with Ukrainian people. The Texas Package Stores Association also said that they were ready to support economic sanctions against Moscow by removing Russian imports from their stores.

Utah Gov. Spencer J. Cox, a Republican, has issued an executive order asking the Utah State Liquor Stores and the Utah Department of Alcohol and Beverage Control to remove all “Russian-produced and Russian-branded” products off the shelves “immediately.” The Governor’s Office of Economic Opportunity will also review the state’s procurements, according to the executive order signed on Feb. 26.

In Ohio, Republican Gov. Mike DeWine has asked the Ohio Department of Commerce to stop the purchase and sale of all vodka made by Russian Standard, the “only overseas, Russian-owned distillery with vodka sold in Ohio.” The company sells vodka under the brand names Russian Standard Vodka and Green Mark Vodka.

“Ohio Liquor estimates that there are approximately 6,400 bottles of vodka made by Russian Standard currently for sale in Ohio’s 487 liquor agencies across the state. Retailers have been asked to immediately pull Green Mark Vodka and Russian Standard Vodka from their shelves,” DeWine said in a Twitter post.

New Hampshire Republican Gov. Chris Sununu has also signed an executive order instructing the state’s liquor and wine outlets to remove Russian spirits from stores.

Despite these initiatives, Russia might not be impacted much by the boycott.

Only around 1.2 percent of all vodka imports into the United States in the first half of 2021 came from Russia, according to data from the Distilled Spirits Council of the United States.

The most popular vodka brands sold in the United States like Smirnoff, Svedka, New Amsterdam, Tito’s, Absolut, Ciroc, and SKYY, are made either domestically or in European countries like the UK, France, and Sweden.

Liquor stores in Canada have also announced a boycott of Russian alcoholic beverages. Canada imported roughly $3.78 million worth of such beverages from Russia last year, down 23.8 percent from 2020. In Ontario, 679 stores will remove all alcoholic products from Russia.

“Ontario joins Canada’s allies in condemning the Russian government’s act of aggression against the Ukrainian people and we strongly support the federal government’s efforts to sanction the Russian government,” Ontario Finance Minister Peter Bethlenfalvy said in a statement. “The people of Ontario will always stand against tyranny and oppression.”

Some have expressed a mixed response to this retail boycott, claiming that the overall effect on the Russian economy will be minimal, while expressing concern for small local vendors who have already purchased the inventory.

As Russian banks closed down both ATMs and then, later, open market trading, to avoid or contain the fallout from the Russian incursion into Ukraine, it’s becoming increasingly apparent that the West doesn’t have the right tools to sanction Russia  – not that they could even if they did.

The problem, as we have said many times before,boils down to Russia’s control over Europe’s energy supplies. But even as a growing number of Russian oligarchs release messages claiming that their sympathies lie with the Ukrainians (not that any of them have actually committed to doing anything that might undermine the war effort), Russia’s position remains unassailable.

And now, a German economy ministry official has confirmed that despite the sweeping sanctions Imposed on Russia, including the removal of it banks from the SWIFT system, that German companies will still be able to find ways to pay their energy bills to the Russians to keep the gas flowing.

Here’s more from a brief Reuters note on the subject”

There are still channels by which Germany’s gas bills can be paid despite the exclusion of Russia from the main global payments system SWIFT, an economy ministry spokesperson said on Monday.

At the same time, it is impossible to estimate the total impact of sanctions against Russia on the German economy at the moment, the spokesperson said.

A few hours later, the US jumped on that bandwagen

Still, the intensity of the panic and the dramatic scenes from the front have been enough to send the price of natural gas in Europe to soar more than 40%.

This isn’t a surprise: Putin and Russia have been well-prepared for the international sanctions and have long been busy devising ways to circumvent them. What’s more, Russia’s oil and gas resources are simply too tempting for buyers to turn down.

According to our most recent report, dated to Saturday evening, the US and its European partners had agreed to the following regarding Russia:

1. Commit to ensuring that “selected Russian banks” are removed from the SWIFT messaging system: “This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.
2. Commit to imposing “restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of our sanctions.”
3. Commit to “acting against the people and entities who facilitate the war in Ukraine” by taking measures to limit the sale of citizenship, so called golden passports, that let wealthy Russians connected to the Russian government become citizens.
4. Commit to launching “a transatlantic task force that will ensure the effective implementation of our financial sanctions by identifying and freezing the assets of sanctioned individuals and companies that exist within our jurisdictions.”
5. Stepping up or coordination against disinformation and other forms of hybrid warfare.

European Commission chief went ever further.

In coordination with 🇺🇸🇫🇷🇩🇪🇮🇹🇨🇦🇬🇧 I will now propose new measures to EU leaders to strengthen our response to Russia’s invasion of Ukraine and cripple Putin’s ability to finance his war machine. https://t.co/iU2waDzo9s

— Ursula von der Leyen (@vonderleyen) February 26, 2022

First, we commit to ensuring that a certain number of Russian banks are removed from SWIFT.⁰
It will stop them from operating worldwide and effectively block Russian exports and imports.

— Ursula von der Leyen (@vonderleyen) February 26, 2022

She also took some shots at Russia’s central bank.

Second, we will paralyse the assets of Russia’s central bank.

This will freeze its transactions.

And it will make it impossible for the Central Bank to liquidate its assets. pic.twitter.com/8H9eWkNCW9

— Ursula von der Leyen (@vonderleyen) February 26, 2022

Of course, Germany wouldn’t be in this terrible position today – where it must choose between buying Russian energy products or allowing its citizens to freeze – if it had only continued to support its nuclear scientists and their power plant goals. Instead, Chancellor Angela Merkel de-commissioned nuclear power plants and made the country less reliant on Russia. It appeaes she did this for political reasons.

But the timing of this decision is already coming back to bite. As one twitter user put it:

German foreign minister Annalena Baerbock: “We buy 50% of our #coal from Russia. If we exclude Russia from #SWIFT the lights in #Germany will go out.”

yeah maybe should have thought of that before shutting down your nuclear power stations

— steve hilton (@SteveHiltonx) February 27, 2022

As a reminder, the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is the financial-messaging infrastructure that links the world’s banks. The Belgium-based system is run by its member banks and handles millions of daily payment instructions across more than 200 countries and territories and 11,000 financial institutions. Iran and North Korea are cut off from it. But despite it’s tremendous clout the fact remains: it’s only a messaging service. No dollars are flowing through its systems.

And finally, due to the US’s crackdown, Russia and China are now in charge of their own SWIFT-like messaging services that exclude the US< once of Washington's mnay fears