Russia’s invasion of Ukraine: How did Swift become a financial weapon to sanction Moscow? –May 31, 2022 15:12

Major Russian banks claim that the suspension of domestic platforms has only a “limited effect”.

SWIFT logo, June 26, 2006.  (BELGA / JACQUES COLLET)

SWIFT logo, June 26, 2006. (BELGA / JACQUES COLLET)

Leaders from 27 European Union (EU) countries reached an agreement on Monday night, May 30th, to exclude three Russian banks, including Sberbank, from the Swift international system. However, it is an essential gear on international bank exchanges.

The country’s major banking institutions maintain it as part of it

This sanction has only limited effect

Since Russia’s attack on Ukraine in late February, the group has already been hit by other sanctions. What is the real impact of this financial weapon, which has already been applied to seven Russian banks since the beginning of March?

What is Swift?

Founded in 1973, Swift is one of the largest banking and financial messaging networks. The acronym for Society for Worldwide Interbank Financial Telecommunication, the company is based in Brussels.Private, Swift

Organized as a banking cooperative

.. The company is proud to be neutral.

This is especially at the origin of the BIC code, which allows you to:

Identify the bank using a unique code consisting of 8-11 characters

Take into account the name of the bank, its country of origin, its location, and the branch that processed the order in question.

What is Swift?

Implemented to replace the aging Telex technology, this group performs several tasks.

Transfer of payment orders between banks

, Remittance orders from bank customers, securities buying and selling orders, etc. Standardized messages enable fast, confidential and inexpensive communication between financial institutions.

The company emphasized its credibility on its website, ”

11,000 banks and securities organizations

Market infrastructure and corporate clients in over 200 countries and regions. ”

Swift’s role goes beyond finance. An agreement signed by the United States and the European Union in mid-2010 has given the U.S. Treasury Department access to European banking data over networks in place of the fight against terrorism.

What does Swift represent in Russia?

According to the site of the Rossvift National Association, Russia will be the second country after the United States.

Users with about 300 Russian banks and institutions that are members of the system

.. More than half of Russian credit institutions are represented by Swift and are designated by this source.

However, Moscow is unique in whether it is payment (intended to be the equivalent of “Mir” card, Visa and Mastercard), rating (Akra agency), or transfer through a system called SPFS. You are setting up your financial infrastructure.Therefore, Sberbank pointed out on Tuesday:

Brussels’ decision did not affect Russia’s internal operations

Does not depend on Swift.

Is there any precedent?

Excluding Sberbank and two other Russian banks is not an isolated case. In March, seven Russian banks were separated from the international financial system.

Gazprombank, the financial sector of the hydrocarbon giant that most payments go through

However, Russia’s gas and oil supply to the EU remains in the system.

Before Russia invaded Ukraine, Swift was already “stopped” in November 2019

Access to a network of specific Iranian banks

Under sanctions decided by the United States against Iran. Iran was also disconnected from the Swift system between 2012 and 2016.

Is it an effective weapon?

Block bank access to the Swift network. That is him.

Prohibit receiving or issuing payments through this channel

.. As a result, foreign establishments are also prohibited from doing business with this bank. Therefore, this complicates economic exchanges between countries that use Swift and Russia, especially for the purchase of gas, for which Moscow is the main supplier.

In the case of Sberbank, severe sanctions had already been imposed by the United States and the United Kingdom. “The exclusion of Swift does not change the status of international payments,” the bank said Tuesday.

Get a country as important as Russia from Swift

It could also accelerate the development of competing systems with China, for example. The Swift system is even more effective when everyone participates.