SWIFT Ban on Russia

The United States and the European Union (EU) have decided to cut off a number of Russian banks from SWIFT, the main international payment system. Russia’s central bank assets will also be frozen, which will limit Moscow’s ability to access its foreign reserves.

Overview:

  • This move’s intention is to further isolate Russia from the international financial system keeping in view the Russian invasion of Ukraine.
  • These sanctions are the most severe against Moscow since its forces invaded Ukraine. This is going to have a significant impact on Russia that relies significantly on the SWIFT platform for its natural resource trade, such as gas and oil exports.
  • In the financial world, cutting a country off from SWIFT is equivalent to restricting a country’s Internet access.

Prior to Russia, has any country been cut off from SWIFT?

Prior to Russia, Iran was the only country that was cut off from the SWIFT. Being cut off from SWIFT resulted in losing a third of Iran’s foreign trade revenue.

How many Russian banks have been cut off from SWIFT?

As of now, the action against Russia has only been partially implemented, with only a few Russian banks receiving the sanctions. The option of broadening the sanction to a pan-country ban is being held back by as of now the US and its allies as a further escalatory action.

How will this move affect Russia?

Excluding Russian banks from the SWIFT platform will have a significant negative impact on the country’s economy. Only a few banks have been targeted to keep the possibility of further escalation open while also ensuring that the sanctions have the greatest possible impact on Moscow while avoiding a major impact on European companies that deal with Russian banks for their gas import payments. Also, the restrictions on Russia’s central bank will prevent it from using its foreign exchange reserves to mitigate the impact of sanctions.

About SWIFT

Society for Worldwide Interbank Financial Telecommunication (SWIFT) system is a secure platform that is used by various financial institutions to exchange information related to global monetary transactions like money transfers.

SWIFT does not directly move money around. Instead, it serves as a middleman by providing secure financial communications services for more than 11,000 institutions located in over 200 countries. SWIFT is located in Belgium and central banks from 11 countries oversee it.

The countries are France, Canada, Italy, Germany, the Netherlands, Japan, Switzerland, Sweden, the United States, the United Kingdom, and Belgium.

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