Western rift as Germany 'backs down' over sanction threat if Russia invades Ukraine

The West has reportedly dropped plans to block Russia from the international bank payment system if it invades Ukraine, the so-called "nuclear" option among a range of proposed sanctions.

The German government has briefed that threats to exclude Russia from the Swift system are to be dropped over fears it could destabilise international markets, according to Handelsblatt newspaper.

But the US pushed back against the claim, insisting “no option is off the table” in the event of Russian aggression.

The signs of division come amid reports Anthony Blinken, the US secretary of state, is to fly to Berlin on Thursday for urgent talks with Olaf Scholz, the German chancellor.

Annalena Baerbock, the German foreign minister, is set for talks with the Russian government in Moscow on Tuesday.

The West has threatened to block Russia from the Swift system, effectively cutting it off from international payments, if it attacks Ukraine.

But German government sources told the country’s Handelsblatt newspaper the US and its European allies are backing away from the idea over concerns it could destablise international markets or open the way for Russia to develop an alternative payment system.

The West is working on targeted sanctions against Russia’s major banks instead, according to the newspaper.

But the US immediately pushed back against the report. “No option is off the table,” said a spokesman for the National Security Council.

“We continue consulting very closely with European counterparts on severe consequences for Russia if it further invades Ukraine.”

Germany is reportedly pressing for an exception to any sanctions to enable it to continue paying for Russian gas and oil imports in the middle of winter.

Financial experts have cast doubt on concerns Russia may develop its own payment system, arguing there are already many alternative systems, and that the key attraction of Swift is access to US dollars.

It is against this backdrop that Mr Blinken is to fly to Berlin at short notice on Thursday for urgent talks with Mr Scholz and his government.

The US secretary of state is also expected to make a speech on the Russian threat to Ukraine during his visit.

The divisions come as reports emerged from Ukraine of an exodus of Russian diplomatic staff earlier this month.

Ukrainian government sources claimed Russia began emptying its embassy in Kyiv on January 5 when 18 people set out on the 15-hour drive to Moscow. The group was mostly made up of the wives and children of diplomats.

A further 30 people left the Kyiv embassy and the consulate in Lviv in the following days, and Ukraine claims staff at two more consulates have been told to leave.

“Each further aggressive act will have a high price for Russia, economically, strategically, politically,” Ms Baerbock, the German foreign minister, warned after talks in Kiev on Monday.

Ms Baerbcok is to meet with her Russian counterpart, Sergei Lavrov, in Moscow on Tuesday as she seeks to reassert a European voice in talks.

Angela Merkel used to take the lead for the West with Vladimir Putin, but the US has been dealing with Russia directly since her retirement and Europe has been largely frozen out.

Ms Baerbock has long pushed for her country to take a tougher line with Russia, but there are deep divisions within the German government over the issue.