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Germany is opposing Swift ban for Russia blocking European Union Sanctions.

In: Finance

The European Union is trying to broaden its sanctions against Russia by disabling the biggest Russian Bank and its energy share of the market, but Germany stands against the measures and it has created tensions over a divided response to the war.

According to multiple diplomats, familiar with the matter, Berlin is resisting efforts to add Sberbank PJSC to the list of Russian financial institutions cut off from SWIFT (the bank messaging system behind much of global transactions).

As Russia intensifies attacks on Ukraine, calls to strengthen penalties from member states in Central and Eastern Europe have grown. As part of a decision to shield energy-related transactions, Sberbank, which holds about half of Russian retail deposits, was excluded from the initial list of banks being removed from SWIFT.

Chancellor Olaf Scholz, has publicly been calling for restraint on sanctions that could impact energy. Germany has repeatedly urged caution over the move during diplomatic meetings that have taken place in recent days, including among ministers.

Olaf Scholz also said this week that he opposes cutting off supplies from Russia, making clear that continuing energy imports is a “conscious decision,” and calling deliveries of oil and gas of “essential importance” to the European economy.

President Joe Biden announced on Tuesday that the U.S. will ban imports of Russian fossil fuels (crude oil, natural gas and coal) in a move that was partially supported by the U.K.

Now, Germany’s stance risks the efforts to punish the Kremlin over its war on Ukraine, as the allies are trying to deter the continuation of the war.

European nations rely more heavily on Russian fuels than the U.S. and governments are concerned about the impact on businesses and consumers, who are already struggling under rising prices. Following the U.S. and the U.K. banning on oil imports from Russia, Germany and others opposed the European Union measures.

Russia provides more than 40% of the EU’s total consumption. As part of a strategy to direct the continent off Russian energy, the EU’s executive arm noted that there are more potential alternatives for oil and coal supplies than for gas.

Germany is drawing criticism at the moment, the popular perception is that Germany is currently more concerned about protecting its economy rather than punishing Russia. However, it is also known that Germany’s economy relies heavily on Russian supplies of gas and oil, which account to more than 50% and 33.33% of its total demand, accordingly.

Recently Germany had proposed to help Ukraine by arming them and to increase the defense spending to 100 Billion Euros. Which was criticized as it was perceived as if the nation was abandoning its neutral stance on conflicts. Now, with a strained economy, interests seem to be shifting and disrupting the measures used to stop Russia from continuing its attacks on Ukraine.

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