The West has agreed an onslaught of sanctions over Russia's invasion of Ukraine, but resistance from key EU nations fearful of severing their power sources has resulted in them holding off on deploying the "financial nuclear weapon" of banishing Moscow from the SWIFT banking transfer system.

Ukraine has expressly called on Western allies to expel Moscow from the system that banks rely on to transfer money.

But US President Joe Biden revealed this week that while it remains an option, "right now that's not the position that the rest of Europe wishes to take".

Former European Council President Donald Tusk lashed out at EU capitals over their failure to agree on the toughest sanctions such as cutting Russian banks off from SWIFT, exposing a rift within the bloc over its response.

"In this war, everything is real: Putin's madness and cruelty, Ukrainian victims, bombs falling on Kyiv. Only your sanctions are pretended (sic)," Tusk tweeted.

"Those EU governments, which blocked tough decisions (i.e. Germany, Hungary, Italy) have disgraced themselves."

But German Finance Minister Christian Lindner laid out starkly the preoccupation of Europe's biggest economy: suspension of SWIFT "would mean that there is a high risk that Germany will no longer receive gas, raw material supplies from Russia".

Lindner told public television he was "open" to including SWIFT "in the course of possible further toughening of sanctions" while adding that allies would "have to be aware of the consequences".

With 40 percent of gas consumed in Europe arriving from Russia, Germany's fears about the possibility of severe disruptions are well founded.

Austria, Hungary and Italy are also reluctant, pitting them against Poland, the Baltic states and non-EU member Britain.

Hungarian Prime Minister Viktor Orban alluded to his key concern -- energy prices -- as he announced sanctions agreed by the EU late Thursday.

"These sanctions do not extend to energy so... energy supplies to Hungary and the other member states of the EU are guaranteed," he said.

Founded in 1973, the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, does not actually handle any transfers of funds itself.

European gas imports from Russia would be at risk if the country is cut off from the SWIFT bank transfer system
European gas imports from Russia would be at risk if the country is cut off from the SWIFT bank transfer system AFP / John MACDOUGALL

But the system is used by banks to send standardised messages about transfers of sums between themselves, transfers of sums for clients, and buy and sell orders for assets.

A country that is shut out of the system could still arrange for settlements of payments or transfers on a case-by-case basis.

But it would be severely crippled in its ability to trade with others, as Iran had seen when it was disconnected from the system between 2012 and 2016 over its nuclear programme.

Yet Lindner said the jury was out on whether the sanction would indeed hurt Moscow as much as it did Tehran.

"I fear that Putin has already built up an alternative to this SWIFT system," he said.

Calls for Russia to be excluded from SWIFT had already been made in 2014 when it annexed Crimea from Ukraine and Moscow has since sought to build up its own system.

The Russian System for Transfer of Financial Messages connects 400 Russian banks and being booted out of SWIFT could well accelerate its development.

German Foreign Minister Annalena Baerbock also said shutting Russia out risked hurting innocent people.

"It would mean that a granddaughter who lives in Europe wouldn't be able to transfer money to her grandmother," she said.

"But those who are responsible for the bloodshed will still find ways and means to still carry out their transactions," the minister said, adding that in the case of Iran, humanitarian projects had to be halted as they could not be financed.

Austrian Chancellor Karl Nehammer also cited experts' estimates that exclusion from SWIFT "won't bring the necessary success", although he later reversed Vienna's reluctance to say his country would push for exclusion from SWIFT.

For now, the option remains on the table, and French Finance Minister Bruno Le Maire said the "financial nuclear weapon" would be weighed up "not in the coming days or weeks, but in the coming hours".

Asked what kind of further aggression must come from Russia before the EU would cut it off from SWIFT, German Chancellor Olaf Scholz's spokesman suggested that not including it in Thursday's package partly came to implementation issues.

Such a move would be "technically complex to prepare," said Steffen Hebestreit.

But the Baltic countries, which directly border Russia, said they had not given up hope on persuading partners to kick Russia out of SWIFT.

"We don't have to wait until there are gunfights in the streets of Kyiv and dead bodies lying around," Latvian Foreign Minister Edgars Rinkevics told reporters.