The White House, along with several European Union countries, announced on Saturday the removal of several Russian banks 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 the Society for Global Interbank Financial Telecommunication. Founded in 1973 to replace telex, it is now used by more than 11,000 financial institutions to send secure messages and payment orders. With no universally accepted alternative, it is an essential tool for 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 in terms of 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 established 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 Iranian banks in 2012 after the European Union imposed sanctions on them over Iran’s nuclear programme. Iran lost nearly half of its oil export earnings and 30% of its foreign trade after the power outage, according to experts.
The United States and Germany would stand the biggest loss if Russia seceded, because their banks are the most common users of SWIFT in communicating with Russian banks, according to Maria Shagina, a visiting fellow at the Finnish Institute of International Affairs.
Senior Russian lawmakers responded by saying that in the event of Russia’s ouster, oil, gas and mineral shipments to Europe would cease.
Are you stuck in the Swift?
Swift said in a statement that it is a “global and unbiased cooperative” and that “any decision to impose sanctions on countries or individual entities rests solely with relevant government agencies and competent 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 take new measures in the coming days regarding 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 willing to comply with legal instructions.”
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