The EU, US and their allies have agreed to cut off a number of Russian banks from the main international payment system, Swift.
“This is intended to cut off these institutions from international financial flows, which will massively restrict their global operations,” a German government spokesman said.
Russia is heavily reliant on the Swift system for its key oil and gas exports.
But the move could also harm Western businesses doing business with Russia.
Swift, or the “Society for Worldwide Interbank Financial Telecommunication”, is a secure messaging system that makes fast, cross-border payments possible, enabling international trade.
Based in Belgium, it facilitates transactions between more than 11,000 banks and financial institutions across the globe.
The banks affected are “all those already sanctioned by the international community, as well as other institutions, if necessary”, the German spokesman said.
Ursula von der Leyen, president of the European Commission, said the allies would also stop Russia from “using its war chest,” by paralysing the assets of its central bank. They agreed to freeze its transactions and prevent the central bank from liquidating its assets.
She added there would be a crackdown on so-called “golden passports” that “let wealthy Russians connected to the Russian government become citizens of our countries and gain access to our financial systems”.
UK Prime Minister Boris Johnson said Britain had taken “decisive action”, tweeting: “We will keep working together to ensure Putin pays the price for his aggression.”
Responding to the announcement, Ukraine’s Prime Minister Denys Shmyhal tweeted his appreciation for the sanctions, calling them a “real help during this dark time”.
It is the latest round of sanctions to hit Russia since it launched an invasion of Ukraine this week.
Removing banks from Swift is deemed to be a severe curb because almost all banks use the system.
Russia’s transactions account for 1.5% of all of Swift’s global transactions.
Source: BBC News