The White House, along with many European Union countries, announce On Saturday, some Russian banks were expelled from the highly secure “Swift” network that connects thousands of financial institutions around the world.
But what exactly is Swift and how will it affect Russia?
SWIFT is an acronym for Society for Worldwide Interbank Financial Telecommunication. It was founded in 1973 to replace telex and is now used by more than 11,000 financial institutions to send secure messages and payment orders. With no universally accepted alternative, this is an essential plumbing of global finance.
Removing Russia from the SWIFT system will make it nearly impossible for financial institutions to send money in or out of the country, causing a sudden shock to Russian companies and their foreign clients — especially buyers of oil and gas exports denominated in US dollars.
SWIFT is based in Belgium and is managed by a 25-person board of directors. SWIFT, which describes itself as a “neutral instrument”, is incorporated under Belgian law and must comply with European Union regulations.
What would happen if Russia was removed?
There is precedent for removing a country from SWIFT.
SWIFT fired Iran’s banks in 2012 after the European Union imposed sanctions on them over the country’s nuclear programme. Iran lost nearly half of its oil export revenue and 30% of its foreign trade after the power outage, according to for experts.
The United States and Germany will lose the most if the connection between Russia is lost, because their banks are the most common SWIFT user in communicating with Russian banks, according to Maria Shagina, a visiting fellow at the Finnish Institute of International Affairs.
Top Russian lawmakers responded by saying that shipments of oil, gas and minerals to Europe would stop if Russia was expelled.
Are you SWIFT stuck?
Swift said in a statement that it is a “global, impartial cooperative” and “any decision to sanction countries or individual entities rests solely with the appropriate government agencies and appropriate legislators.”
“We are aware of the joint statement issued by the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the United States, in which they announced that they will implement new measures in the coming days with regard to Russian banks. We are communicating with the European authorities to understand the details of the entities that will be subject to the new measures,” the statement said. We are prepared to comply with the legal instructions.”