European Union leaders have been studying what some call the “nuclear option” to keep Russia away from it SwiftA tight security network connecting thousands of financial institutions around the world after the invasion of Ukraine.
US President Joe Biden said Thursday that getting Russia off the Swift system is not the direction the rest of Europe wants to take at this moment, but noted that taking the nation off the grid is “always an option.”
“The sanctions that we’ve proposed to all of their banks have the same consequences, and possibly more results than Swift,” Biden said, referring to Swift. The last round of sanctions announced today.
On Thursday, Ukrainian Foreign Minister Dmytro Kuleba urged the West to ban Russia from the Swift system in a tweet on Twitter. Earlier on Thursday, CNN reported that the European Union had not made a decision on whether to isolate Russia from the SWIFT system and that EU countries were divided over the decision.
But What is the Swift system?And the And what could this mean for Russia? The Association for Worldwide Interbank Financial Telecommunication was founded in 1973 to replace telex and is now used by more than 11,000 financial institutions to send secure messages and payment orders. With no universally accepted alternative, this is an essential plumbing of 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 denominated in US dollars.
Maria Shagina, Visiting Fellow at the Finnish Institute of International Affairs, Written in an article last year for the Carnegie Moscow Center. Ex-Finance Minister said excluding Russia from SWIFT would cause its economy to shrink by 5% Alexei Kudrin appreciates in 2014.
SWIFT is headquartered in Belgium and is managed by a 25-person board of directors, including Eddie Astanin, Chairman of the Central Terminal Clearing Center in Russia. SWIFT, which describes itself as a “neutral instrument”, is incorporated 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 disconnected Iran’s banks from electricity in 2012 after the European Union imposed sanctions on them over the country’s nuclear programme. According to Shegheneh, Iran lost nearly half of its oil export earnings and 30% of its foreign trade after the power outage.
“SWIFT is a global, impartial cooperative that has been created and operated for the collective benefit of its community,” the organization said in a January statement. “Any decision to impose sanctions on countries or individual entities is up to the relevant government bodies and relevant legislators,” she added.
It is not clear how much support exists among US allies for similar actions against Russia. The United States and Germany would lose out the most if Russia was cut off, as their banks are the most common SWIFT user of communicating with Russian banks, according to Shagina.
The European Central Bank has warned lenders with significant exposure to Russia to prepare for sanctions against Moscow, according to financial times. European Central Bank officials also asked banks how they would respond to the scenarios, including a move to prevent Russian banks from accessing the SWIFT system.
Read more about SWIFT here.
CNN’s Kate Sullivan in Washington, DC, Niamh Kennedy in London, and James Frater in Lviv contributed to this post.
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