The SWIFT sanctions, meant to punish selected Russian banks for the Ukraine invasion, have been announced but not yet implemented and already there’s turmoil in European energy markets.

The price of Urals oil, the reference for crude produced in Russia, dropped off the table on Wednesday. It was selling at a $20-a-barrel discount to the $114.25-a-barrel price of Brent, the European benchmark.

President Joe Biden is worried that a disruption in Russian oil production could ripple to the US and give an unwelcome boost to already rising gasoline prices. The biggest issue when it comes to sanctions, however, isn’t oil, it’s Russia’s natural gas, which accounts for 40% of the European Union’s supply. Though it would cripple Russia’s economy, an interruption in natural gas shipments would also leave many Europeans shivering in the cold.


When the Biden administration and its counterparts drew up Russia’s banishment from SWIFT, an international messaging service for banks that keeps payments flowing, they were careful to ensure that energy transactions were left out. Seven Russian banks have been restricted from SWIFT, but Sberbank and Gazprombank, the financial institutions that handle Russia’s gas-export payments, remained untouched.

Biden and his allies in Western Europe and Canada are walking a fine line between rebuking Russian President Vladimir Putin for the Ukraine invasion and hurting themselves by restricting Russian energy. They’ve said they’re still discussing an all-out economic war against the Kremlin by adding sanctions on oil and gas, and in his public remarks Biden appears to be preparing voters for the possibility that further penalties against Russia could bruise them, too . Whether the allies would go that far could depend on how far Putin goes with his war.

“The president, working with our allies, is trying to impose economic sanctions on Russia that impose pain on the Russian economy and minimize the impacts on the US economy,” Cecilia Rouse, chair of the Council of Economic Advisers, told NPR on Wednesday. “As the president has said, we really can’t expect to get through this, Russia having invaded Ukraine, which is such a serious threat to democracy worldwide, without there being some costs here at home.”


In the geopolitical match of wills, the Western countries hope to preserve an exit route for Putin should he decide to de-escalate militarily, said Henning Gloystein, director of energy, climate and resources at political risk consultancy Eurasia Group. So world financial authorities need not play all their cards in the week following the invasion, saving for later the expansion of sanctions to more banks, then coal and steel. Their trump card, embargoing oil, would come last if needed, Gloystein said.

“They’re very serious,” Gloystein said. Oil is “not on the table or imminent, but it’s being discussed much more openly today than it was two days ago. But gas is the last one.”

If sanctions target oil, it could be damaging to the West. Russia exports 2.5 million barrels of crude to the EU and half a million to the US daily. Already high prices would go higher, but if the gap is filled by other options, such as from OPEC members pumping more, a supply shortage, theoretically at least, could be remedied in a couple of months.


The situation is far more urgent with natural gas. If the Russian supply were cut off, it could mean energy rationing in Europe, something most Europeans have never experienced. Prospective NATO member Finland and current NATO member Latvia get more than 90% of their energy from Russia, meaning that contingency plans would have to be drawn up and logistical hurdles overcome before countries jumped into sanctions for natural gas, said Daniel Tannebaum, a partner at consultancy Oliver Wyman who heads the anti-financial-crime department for the Americas.

“This is not a point about not being tough enough,” Tannebaum said. “There’s a pragmatic element of how you heat those countries.”

In the meantime, the oil industry has begun to “self-sanction” Russia. In the past two days BP, Shell, Equinor, and even ExxonMobil
have abandoned sprawling projects in Russia that they’d toiled for decades to achieve. Generations of CEOs had personally negotiated with Putin, and now they’re tossing the investments aside without buyers lined up. Exxon’s deal alone is valued at $4 billion.

To avoid skyrocketing energy prices, Russia will need to be reined in without enacting an outright embargo. Analyst Michael Hsueh at Deutsche Bank said oil could hit $170 a barrel if sanctions were to shut down Russian exports entirely.


The Society for Worldwide Interbank Financial Telecommunications, the full name of the global cooperative overseen by the National Bank of Belgium, was created in 1973 and connects more than 11,000 financial institutions around the world. The messaging service said it recorded a daily average of 42 million messages last year, with Russia accounting for 1.5% of them. The Russian banks that will be tossed from SWIFT are VTB, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and VEB.

The sanctions are following a carefully crafted plan designed to maintain pressure on Russia while ensuring that public support won’t want to, said James Angel, a professor at the McDonough School of Business at Georgetown University.

“We see the vise slowly tightening,” Angel said. “This is a very high-stakes level of international activity and you don’t necessarily want to shoot all of your ammunition at once because a lesser level might be effective. If you blow up the pipelines now, Europe freezes this winter and you may lose a lot of the public support for anti-Russian actions.”


With additional reporting by Chris Helman