Brussels, 25 February 2022 (TDI): Amidst rising sanctions against Russia as the Russia-Ukraine conflict worsens, cutting off the invading country from the SWIFT payment has been considered a possible sanction, one which would have significant and long-lasting economic implications.
Society for Worldwide Interbank Financial Telecommunication
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) payments system is a global payments network that allows banks to send and receive payments.
It allows for the secure transmission of information and instructions and is used by banks to transfer money between countries, it is also used to transfer money between banks within a country.
The Swift payments system is used by more than 11,000 banks in more than 200 countries. Over 42 million messages were exchanged through the system in 2021.
Sanctioning Russia against SWIFT
Sanctioning Russia against SWIFT will have significant implications on the country’s economy and GDP. Alexei Kudrin, the former Finance Minister of Russia estimated that doing so would result in a 5% contraction of the GDP within a year.
Cutting off Russia from SWIFT will also bar them from profiting off the sale/exchange for oil and gas which accounts for 40% of the country’s total revenue.
On the other hand, doing so would also prevent most of the European Union from paying for the imports of Russian oil and gas that it depends so heavily on.
Cutting off Russia from SWIFT would not stop their cross-border transactions but it would make it far more expensive and tedious to carry them out.
World leaders remain divided
World leaders remain divided on whether such a step be taken at this time or at any later stage. The United States President, Joe Biden said cutting Russia off from SWIFT is a step most European nations are not willing to take at this moment.
“It is always an option, but right now, that’s not the position that the rest of Europe wishes to take.” -Joe Biden, President of the United States of America.
After the passing of the latest round of sanctions on Russia by the EU, Olaf Scholz, the German Chancellor said that it’s important to agree on the measures that have been taken and keep everything else for a situation in which they may be needed in the future.
He further added that all options are still on the table. It is very unclear at this moment what the EU’s stance is on sanctioning Russia against SWIFT because of the impacts it would have on Europe’s economy.
Europe lenders currently hold $30 billion in foreign banks’ exposure to Russia. Cutting off SWIFT also runs the risk of affecting Ukrainian citizens.
Remarks of Ukrainian President upon EU’s ambivalence
I will not be diplomatic on this. Everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too. BAN RUSSIA FROM SWIFT.
— Dmytro Kuleba (@DmytroKuleba) February 24, 2022
UK, Canada push for Sanctioning Russia
The British Prime Minister, Boris Johnson, in a G7 call on Thursday called for the removal of Russia from SWIFT, Canadian Prime Minister Justin Trudeau also supported Johnson’s stance on the situation.
Although the British Prime Minister later said that it was important to have unity. Another G7 official said that cutting Russia off would also cause an increase in the price of fuel.
The price of fuel has already skyrocketed adding further inflationary pressure around the globe. Cyprus and Italy are also reluctant to take such a step at this stage.
Other targeted sanctions aimed at cutting Russia off from key imports, driving down its economy, and trying to plunge it into a recession are already being implemented.