I came across this information about SWIFT network posted the other day. This could have a very big impact on the Russian and Ukraine war and instead of trying to put it in my own words I thought I would repost it.
Following Russia’s invasion of Ukraine, Western governments have dropped heavy sanctions on Russian banks, companies, and elites—including President Vladimir Putin himself.
But they’ve yet to move forward with what’s been called the “nuclear option”: banning Russia from using SWIFT.
What is SWIFT?
Belgium’s Society for Worldwide Interbank Financial Telecommunications (SWIFT) runs a messaging service that facilitates transactions across 11,000+ financial institutions globally. Think of it as the “Gmail of global banking.”
Entities in every country except North Korea use SWIFT to shuffle trillions of dollars’ worth of funds across borders. And Russia is a SWIFT power user—as a major supplier of energy and other goods, it ranks sixth globally for payment messages sent on SWIFT. So if Russia were cut off from SWIFT, “the nation would essentially be severed from much of the global financial system,” the NYT wrote.
Thing is, not everyone’s prepared for that
While the UK and Ukraine are trying to boot Russia from the global group chat, the US and some EU nations are a little more hesitant. Here’s why:
- They’re not ready to go full James Franco in 127 Hours. Their citizens still use Russian energy to keep the lights on, so shutting down Russia’s Gmail account would essentially force financial communications onto a janky platform like 1990s-era AOL, resulting in a colossal headache for everyone involved.
- Another worry for the US is how blocking Russia from SWIFT would impact the dominance of the US dollar in the longer term. The US enjoys many benefits from the dollar’s status as the world’s reserve currency, and US officials are concerned that booting Russia from SWIFT would spur Moscow to join up with Beijing and develop alternative payment systems (on the blockchain, for instance) that undermine the dollar.
Of course, workarounds to SWIFT already exist, which is another reason why some sanctions experts say that blocking SWIFT access is an overrated tool for punishing Russia. You could do it, but you might be creating more problems for yourself in the process.
