July 1, 2022

disconnecting Russia from the Swift financial network, one of the options on the table

As Russia deploys tens of thousands of troops to the Ukrainian border, the United States is working on an economic war scenario and looming the threat of extremely powerful financial sanctions against Moscow. Among the options on the table is one often referred to as ” nuclear “, which would amount to cutting Russia off from the international Swift network, an essential cog in international finance and trade.

Swift, a Belgian cooperative society created in the early 1970s to replace the telex, provides a messaging service to its 11,000 members, mainly financial institutions, so that they can exchange financial transactions between themselves (payments between their customers , transactions involving shares or bonds), in an automated and secure manner. Every day, some 40 million transactions go through messaging, across more than 200 countries and territories.

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Disconnecting Russian financial institutions from the Swift network would therefore heavily penalize the country’s economy. Commercial relations between Russian companies and Western companies, as well as payments transiting through Western banks, would be deeply disrupted. Instead of exchanging through Swift’s automatic channel, Russian banks would be forced to switch back to manual mode, by fax or email, which would involve additional transaction processing times, risks of errors and disputes. later. What cause, mechanically, a sudden brake on international transactions involving Russia.

Healthy Russian financial sector

In addition, Russia’s exclusion from the Swift system could be accompanied, as part of broader sanctions measures focused on the financial sector, by a ban on carrying out certain types of transactions with a series of Russian banks.
Such threats have already been carried out, in particular against Iran, in an attempt to block its nuclear program. In 2012, the Swift network suspended Iranian financial institutions under sanction, at the request of the EU Council, under pressure from the United States. “Iran has been a good laboratory, because few countries have been sanctioned so much. This financial embargo has proven to be very effective in isolating and weakening the Iranian economy”, says Thierry Coville, researcher at the Institute of International and Strategic Relations and specialist in Iran.

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