The White House, along with several EU nations, announced on Saturday the expulsion of certain Russian banks from SWIFT, the high-security network connecting thousands of financial institutions around the world.
But what exactly is SWIFT and how will it impact Russia?
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It was founded in 1973 to replace the telex and is now used by over 11,000 financial institutions to send secure messages and payment orders. With no globally accepted alternative, it is essential plumbing for global finance.
Removing Russia from SWIFT would make it nearly impossible for financial institutions to send money in or out of the country, delivering a sudden shock to Russian companies and their foreign customers — especially buyers of oil and gas exports denominated in US dollars.
SWIFT is based in Belgium and governed by a board consisting of 25 people. SWIFT, which describes itself as a “neutral utility,” is 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 over the country’s nuclear program. Iran lost almost half of its oil export revenue and 30% of foreign trade following the disconnection, according to experts.
The United States and Germany have the most to lose if Russia is disconnected, because their banks are the most frequent SWIFT users in communicating with Russian banks, according to Maria Shagina, a visiting fellow at the Finnish Institute of International Affairs.
Senior Russian lawmakers have responded by saying that shipments of oil, gas and metals to Europe would stop if Russia is expelled.
Has SWIFT commented?
In a statement, SWIFT said it is a “neutral global cooperative” and “any decision to impose sanctions on countries or individual entities rests solely with the competent government bodies and applicable legislators.”
“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 they will implement new measures in the coming days with respect to Russian banks. We are engaging with European authorities to understand the details of the entities that will be subject to the new measures and we are preparing to comply upon legal instruction,” the statement said.
