প্রকাশ: 27/02/2022
Russia's invasion of Ukraine has intensified calls to impose
sanctions that would devastate the Russian economy and target leaders in its
government.
One of the key demands put forward by the Ukrainian
government is for Russia to be barred from SWIFT - the world's most-used
interbank communications system.
"I will not be diplomatic on this. Everyone who now
doubts whether Russia should be banned from SWIFT has to understand that the
blood of innocent Ukrainian men, women and children will be on their hands too.
BAN RUSSIA FROM SWIFT," Ukraine's foreign minister Dmytro Kuleba tweeted
on Thursday.
But what is SWIFT, and why hasn't Russia been banned from
using it?
What is SWIFT?
SWIFT, short for the "Society for Worldwide Interbank
Financial Telecommunication", is a secure messaging system that
facilitates rapid cross-border payments.
Its standardised system of secure messages is highly
trusted, and allows banks to process high volumes of transactions very quickly.
The Belgium-based system was set up in 1970 as a
co-operative made up of the thousands of financial institutions that use it.
It has become the backbone of international finance. In
2020, around 38 million messages were sent each day over the SWIFT platform,
according to its Annual Review. Each year, trillions of euros are transferred
using the system.
While there are alternatives - for example, Russia and China
operate their own systems that work in similar ways - SWIFT is the most-used
worldwide.
Why would a SWIFT ban matter?
If Russia's banks were banned from SWIFT, they would find it
much harder to access financial markets around the world.
As a result, it would be much harder - although not
impossible - for Russian businesses and individuals with bank accounts in the
country to import and export goods, and borrow and invest abroad.
Some 300 Russian banks and financial institutions use SWIFT
for interbank transfers.
A ban on Russian financial institutions would not be a world
first. Some Iranian banks were barred from SWIFT in 2019 following US
sanctions. The country as a whole had its access suspended between 2012 and
2016.
Why not block it?
While blocking Russian access to the system would impact the
country's economy, it would also have knock-on effects in Europe - leading some
European leaders to withhold their support for such a measure.
German finance minister Christian Lindner told broadcaster
ARD that blocking Russia's SWIFT access would bring with it "a high risk
that Germany would no longer receive gas and other raw materials" from
Russia, a concern reportedly shared by fellow EU states Italy, Hungary, Cyprus
and Latvia.
In the United States, there are also concerns over the
potential destabilising effects of such a move.
Brian Frey, a former US Justice Department prosecutor during
the Trump administration, told the Associated Press that while SWIFT is the
primary messaging system for financial payments, "there are alternatives
to the system" and cutting Russia off would create a "splashback and
immediate problems for the international community".
Locking Russia out of SWIFT could push it into alternative
options like China's own payment processing system or even a blockchain-based
solution.
What are countries doing instead?
On Thursday the European Union revealed what it called its
"toughest sanctions package ever" against Russia.
EU banks will be banned from accepting deposits from Russian
citizens of more than €100,000 and several Russian state-owned companies will
be blocked from accessing EU funding.
New sanctions including measures like freezing EU-based
assets will be imposed on powerful Russian individuals and those close to its
president, Vladimir Putin.
"The impact will be maximum on the Russian
elites," European Commission president Ursula von der Leyen said, adding,
EU sanctions "will drive up inflation, accelerate capital outflows and
gradually erode the industrial base".
In the United Kingdom, Prime Minister Boris Johnson - who
supports banning Russia from SWIFT - announced the former EU country's own
package of sanctions, focused on limiting access to its important financial
markets for Russian banks and companies.
"Nothing is off the table," Johnson said.
In the United States, President Joe Biden announced sanctions
targeting Russia’s two largest banks, Sberbank and VTB Bank, blocking them from
making transactions in US dollars.
The US Treasury Department said the sanctions overall
"target nearly 80 per cent of all banking assets in Russia and will have a
deep and long-lasting effect on the Russian economy and financial system".
Responding to a question on SWIFT, Biden said the package of
financial sanctions he had would be even more damaging to Russia and suggested
that a decision on a SWIFT ban would be up to European countries.
"It is always an option but right now that’s not the
position that the rest of Europe wishes to take," Biden said.
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