Muristek
London, February 26
Russia's invasion of Ukraine has stepped up pressure for tougher economic sanctions on Moscow, including potentially shutting the country out of SWIFT, the world's main international payments network, hitting Russian trade and making it harder for Russian companies to do business.
SWIFT, or the 'Society for Worldwide Interbank Financial Telecommunication', is a secure messaging systemIt facilitates rapid cross-border payments, making international trade flow smoothlyBanks establishing ties with other banks can use SWIFT messages for paymentsMessages are secure so that payment instructions are typically honoured without questionAllows banks to process high volumes of transactions at speedHas become key mechanism for financing international tradeWho owns SWIFT?
Founded in the 1970s, SWIFT is a co-operative of thousands of member institutions using the service. Based in Belgium, SWIFT makes a modest profit — euro;36 mn in 2020, based on its 2020 Annual Review.
Iran banned in 2012
In March 2012, the EU barred SWIFT from serving Iranian firms and individuals who had been sanctioned in relation to Tehran's nuclear programme. The list included the central bank and other big banks.
The UK government is leading the charge in Europe to exclude Russia from the SWIFT as part of tough sanctions designed to deliver a financial blow to it. Italy and Cyprus too said they would support the move.
Options before Russia
If SWIFT were to exclude Russian banks, it would restrict the country's access to financial markets across the world. Russian companies and individuals would find it harder to pay for imports and receive cash for exports, borrow or invest overseas. Russian banks could use other channels for payments such as phones, messaging apps or email. This would allow Russian banks to make payments via banks in countries which have not imposed sanctions but since alternatives are likely to be less efficient and secure, transaction volumes could fall and costs rise.
Other nations to be hit too
If Russian banks were cut off from SWIFT, exporters would find selling goods to Russia riskier and more expensive.
Foreign buyers of Russian goods would also find it more difficult, potentially prompting them to seek alternative suppliers. But when it comes to Russian oil and gas, foreign buyers could find it harder to find replacement suppliers. Russia is the main EU supplier of crude oil, natural gas and solid fossil fuels, according to the European Commission. Banning Russia from SWIFT is unlikely to be agreed at this stage, EU sources have said.
Will SWIFT agree to ban?
In the past, SWIFT has resisted calls to impose bans on certain countries. It describes itself as neutral and has said it would not take a decision to disconnect institutions as a result of political pressure.
Belgium-based SWIFT is bound by Belgian and EU rules. — Reuters