The White House, along with several EU countries, announced on Saturday the expulsion of some Russian banks from SWIFT, the high-security network linking thousands of financial institutions around the world.
But what exactly is SWIFT and how will it impact Russia?
SWIFT is the abbreviation of Society for Worldwide Interbank Financial Telecommunication. It was founded in 1973 to replace the telex and is today used by more than 11,000 financial institutions to send secure messages and payment orders. With no globally accepted alternative, this is essential plumbing for global finance.
Russia’s withdrawal from SWIFT would make it almost impossible for financial institutions to send money to or from the country, causing a sudden shock to Russian businesses and their foreign customers, especially buyers of oil exports and gas denominated in US dollars.
SWIFT is based in Belgium and governed by a board of 25 people. SWIFT, which describes itself as a “neutral public service”, is a company incorporated under Belgian law and must comply with EU regulations.
What happens if Russia is removed?
There is precedent for removing a country from SWIFT.
SWIFT unplugged Iranian banks in 2012 after they were sanctioned by the EU for the country’s nuclear program. Iran has lost almost half of its oil export revenue and 30% of its foreign trade as a result of the disconnection, experts say.
The United States and Germany have the most to lose if Russia goes offline, as their banks are the most frequent SWIFT users to communicate with Russian banks, according to Maria Shagina, visiting researcher at the Finnish Institute of International Affairs. .
Senior Russian lawmakers responded by saying that oil, gas and metal shipments to Europe would stop if Russia was expelled.
Has SWIFT commented?
In a statement, SWIFT said it was a “neutral global cooperative” and that “any decision to impose sanctions on countries or individual entities rests solely with the relevant government agencies and applicable lawmakers.” .
“We are aware of the joint statement by the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the United States in which they state that they will put implementation of new measures in the coming days with regard to Russian banks. We are engaging with the European authorities to understand the details of the entities that will be subject to the new measures and we are preparing to comply with the legal instructions”, indicates the communicated.
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