On Thursday, February 24 this year. Russia launched a military attack on Ukraine. Targets all over the country were attacked, including the western part. In response, the West is preparing yet another package of economic sanctions, and one of the most frequently mentioned steps is to cut off Russia from SWIFT.
What is this system and what consequences could Russia cut off from SWIFT?
What is SWIFT?
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. Established in 1973, it is an association of thousands of financial institutions that share information about their transactions.
SWIFT is based in Brussels and associates primarily banking institutions from European countries (but not only). Currently, to over 11,000 institutions in 200 countries and territories around the world that transfer data tens of millions of times each day.
It is thanks to SWIFT that bank customers (both private individuals and entrepreneurs) can make international transfers in foreign currencies. Today, it is the basis for settling accounts with entities abroad, for example trading partners. Thanks to SWIFT, millions of people can also send money abroad, for example to their family.
Financial nuclear weapons in the fight against Russia
Russia’s cut-off from SWIFT is often called one of the most painful of sanctions, and a “nuclear financial weapon” that can be used to discourage Russia from taking any further military action. Is it right?
Probably such a step would severely hit Russia’s interests. First of all, it would make it difficult for Russian banks to carry out any international transactions. Without SWIFT, Russian companies would have a serious problem, but so would the Kremlin itself, which exports raw materials and other goods abroad.
Putin’s workaround could be to use his own SPFS (System for Transfer of Financial Messages) system, developed by the Central Bank of the Russian Federation since 2014. The problem is that it works almost exclusively in Russia. Apart from that, only a dozen or so banks from countries such as Belarus and Kazakhstan have contracts with the SPFS.
It would therefore be much more effective for Russia to find other ways to transfer money abroad. For example, the use of cryptocurrencies, although it is difficult to say for now if it would be possible on a larger scale.
It is not known whether Western countries will decide to impose sanctions “in the nuclear version” and cut off Russia from SWIFT. US President Joe Biden announced on Thursday that another package of sanctions against Russia will be announced, and one of the topics would be the issue of SWIFT.
According to unofficial information, the European Union is not planning to cut the aggressor from the system yet.
Source: Gazeta
Ricardo is a renowned author and journalist, known for his exceptional writing on top-news stories. He currently works as a writer at the 247 News Agency, where he is known for his ability to deliver breaking news and insightful analysis on the most pressing issues of the day.
