US President Joe Biden said Thursday that cutting Russia off from Swift’s banking network remains an “option,” after Kyiv demanded that Moscow be excluded from this conservative but necessary gear in international banking exchanges.
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In response to a question from the press, Mr. Biden made clear that the decision to resort to such a possibility was “not currently” a “position” shared by Europeans, while ensuring that Thursday’s new sanctions had “a significant impact and more to be seen”.
But what will happen if Western countries finally decide to resort to rapid weapons to punish Moscow after the invasion of Ukraine?
Swift is one of the largest financial and banking messaging networks that was founded in 1973. The company, which is an acronym for Association for Global Interbank Financial Telecommunication, is headquartered in Brussels.
Unlisted, Swift is organized as a banking cooperative. The company presents itself as neutral.
It is specifically present in the origin of the BIC code, which makes it possible to identify the bank by a unique code of 8-11 characters, taking into account the name of the bank, country of origin, location and branch. After the relevant request has been processed.
Implemented to replace the outdated Telex technology, the group performs many tasks: transferring payment orders between banks, orders to transfer money from bank customers, orders for purchase and sale of securities, etc.
All thanks to unified messaging, allowing fast, confidential and inexpensive communication between financial institutions.
The company promotes its reliability on its website and boasts “more than 11,000 banking and securities institutions, market infrastructure and corporate clients in more than 200 countries and territories”.
Swift’s role goes beyond finance: an agreement signed by the United States and the European Union in mid-2010 officially allows US Treasury services to access Europeans’ bank data over the network, on behalf of the fight against terrorism.
According to the website of the National Assembly Rosswift, Russia will be the second country after the United States in terms of the number of users with about 300 Russian banks and institutions members of the system.
More than half of Russian credit institutions are represented in Swift, which is specified by this source.
However, Moscow is creating its own financial infrastructure, whether for payments (“Mir” cards, intended to be the equivalent of Visa and Mastercard), ratings (Akra Agency) or transfers, via a system called SPFS.
In November 2019, as part of the sanctions imposed by the United States against Iran, Swift “suspended” some Iranian banks’ access to its network.
Then-Treasury Secretary Steven Mnuchin promised to subject the company to “US sanctions (if it provided) financial courier services to certain Iranian financial institutions.”
However, subject to sole Belgian oversight, Swift took only a few days to comply, ruling in a press release that the action was “unfortunate”, but in keeping with “the interest of the stability and integrity of the global financial system as a whole”.
Iran had already cut off from Swift from 2012 to 2016.
Tactically speaking, “the advantages and disadvantages can be discussed,” said Guntram Wolff, director of the Bruegel Research Center who gave an interview to AFP.
Cutting off a bank’s access to the Swift network means preventing it from receiving or issuing payments through this channel. Subsequently, it also prohibits foreign institutions from doing business with this bank.
However, taking out an important country like Russia could speed up the development of a competing regime, with China for example. Swift becomes more effective when everyone participates in it.
“In practical terms, it would be a real headache,” Mr. Wolf continues, especially for Europeans who have many economic exchanges with their Russian neighbor, which is a supplier of gas, among other things.
Westerners already talked about excluding Russia from the Swift regime shortly after Russia’s annexation of Crimea in March 2014.