US, UK, and EU to Ban Russia from SWIFT Financial System
Published: March 2, 2022
The US, UK, and the European Union have agreed to exclude some Russian banks from the system internationally used by financial institutions. With this step, countries are hoping to hit Russia’s network and funds.
The acronym SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. This secure platform allows banks and financial institutions to transfer money all across the world easily and instantly.
More than 200 countries are connected because of this Belgium-based service. It is estimated that around 40 million messages are exchanged using the service as the money is moved from one place to another. Approximately 1% of all those messages involve Russia.
No one country owns the SWIFT system. Around 2,000 financial institutions hold the cooperative society. The National Bank of Belgium is tasked with overseeing the whole process.
By removing Russian banks from this protocol, the hope is to hinder Russia’s easy international transactions. It would disrupt the payments for products that Russia exports and banks would face extra costs and delays.
Russia has its own system in place for situations like these, but many countries do not use the National Payment Card System.
Countries like Germany and Italy opposed this move at first, as most of the EU gets their gas and oil from Russia. By excluding Russia from SWIFT, countries may have to find alternatives for products like these, and the prices would grow further.
While SWIFT tries not to take sides in international altercations, this is not the first country to be excluded from the system. Russia wasn’t banned but was threatened with exclusion back in 2014 when they annexed Crimea.
Iran faced exclusion in 2012 because of its nuclear program, and it had severe consequences because of it.
It is still unknown which Russian banks will be part of the sanctions, but Russia’s former finance minister said this could shrink Russia’s economy by 5%.