Some Russian banks have been cut off from the SWIFT financial system
Image: Alexei NikolskyTASS via Getty Images
The European Union, the United Kingdom, Canada and the United States announced on Saturday that they would expel some Russian banks from SWIFT, the messaging system used by banks that is essential for accessing the international banking system and making transactions. transactions.
The possibility of the sanction has been the subject of much debate in recent days; Cutting Russia from SWIFT would be a significant sanction, but would potentially have far-reaching and potentially negative impacts on the wider global economy.
“We are committed to ensuring that certain Russian banks are removed from the SWIFT messaging system,” the European Commission said. said in a press release, adding that the United States, the United Kingdom and Canada also signed the decision. “This will ensure that these banks are disconnected from the international financial system and will harm their ability to operate globally.”
Earlier Saturday, Ukrainian President Volodymyr Zelenskyy said he hoped the move would happen and that it would result in “billions and billions of losses for Russia – a tangible price for this dastardly invasion of our country… “Ukraine has captured the attention of the entire civilized world. And the practical result? Here it is – SWIFT…Disconnect from global financial civilization,” Reuters reported.
Ursula von der Leyen, President of the European Commission, tweeted that the decision “will prevent them from operating worldwide and effectively block Russian exports and imports”. She also said that a separate sanction “will cripple the assets of Russia’s central bank. This will freeze its transactions. And it will be impossible for the Central Bank to liquidate its assets.”
The commission did not specify which banks would be affected and did not immediately respond to a request from Motherboard. The move comes after days of Russian siege on cities across Ukraine, including the capital, Kyiv.
“Russia’s war represents an attack on fundamental international rules and norms that have prevailed since World War II, which we are committed to defending,” the commission said. “We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”
As Motherboard explained earlier this week, SWIFT is the system banks use to process transactions. It is used by over 11,000 financial institutions and businesses in over 200 countries. More than 42 million transactions are processed there every day. It is very rare for countries to be removed from the system. Prior to this decision, Iran was the only country to be removed from SWIFT.
Cutting Russia from SWIFT “would slow everything down,” George Pearkes, global macro strategist at Bespoke Investment Group, told Motherboard earlier this week. This was seen as a potentially extreme move by some executives, one they were reluctant to make in part because Russian entities owe billions of dollars in debt to European banks; Cutting them from SWIFT in theory makes it very difficult, if not impossible, for these entities to pay their debts, which means it will not only hurt Russia, but also Western businesses and economies. It could also make it incredibly difficult, if not impossible, for European countries to buy Russian gas, for example.
Given the situation on the ground in Ukraine, this might be a small price to pay in exchange for the adoption of a meaningful sanction. The impact of Russia’s removal from SWIFT will likely be felt immediately, although of course this depends on which banks are actually cut.
Zelenskyy has been calling for the move for days, saying earlier on Saturday that “our diplomats fought around the clock to inspire all European countries to agree on a strong and fair decision to disconnect Russia from the international interbank network. We also have this victory.