As Russia angers every country in the world by invading Ukraine, the western world, namely the nations of the NATO alliance, look for ways to damage the Russian economy. Along with sanctions, they look to the international banking payment system, known as the Society for worldwide international financial telecommunication or SWIFT, which supposedly helps money move seamlessly across borders.
As it stands, SWIFT links eleven thousand banks in two hundred countries. Every day more than forty million messages are sent between financial institutions, and experts suggest cutting Russia from this will yield a one per cent fall. Along with other sanctions, this will hit Russia’s oligarchs, President Vladimir Putin’s greatest weakness, as they may just have the power to replace him or influence his decision making over Ukraine. Furthermore, Russia, though a military powerhouse, is not an economic one, and the sanctions may hurt Russia enough that they are forced to pull out of Ukraine.
SWIFT was created by American and European banks which did not want a global monopoly in the banking trade. It is owned by two thousand banks and financial institutions, though overseen by the bank of Belgium. However, this is alongside banks such as the US Federal Reserve and the Bank of England, meaning the NATO alliance has the very real capacity to exclude Russia.
Alongside all the other sanctions now in place, this has the very real possibility to cripple Russia’s economy. Iran was banned from the scheme in 2012 when it began to develop a nuclear programme, causing it to lose near half of its oil export revenues and thirty per cent of foreign trade. For Russia, it will likely have a similar result, particularly because Russia’s economy heavily relies on oil and gas exports. Russia’s former finance minister suggested being cut off from SWIFT could make Russia’s economy shrink by five per cent.
Particularly crippling Russia may prove the best option whilst all-out war is not preferable. Hitting Russia where it hurts may be the only way to get them to withdraw from Ukraine. The effect it will have on Russia’s oligarchs could be the end of Putin’s power. If they choose to remove him because of the effect his actions are having on their bank balance that is.
On the other hand, some nations are reluctant. Germany in particular is hesitant because removing Russia from SWIFT may raise energy prices as formerly they were heavily dependent on Russian gas. At the same time, Russia and China may decide to form their own equivalent. This could have ramifications that left Russia and China in a stronger position than ever before, particularly China, something the USA desperately wants to avoid.
Written by Adam Caudle Research compiled by Hubert Kucharski