Russia’s invasion of Ukraine has triggered sanctions against the country as well as calls to sever it from the main global payments system.

Ejecting Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network could cripple Russia’s ability to trade with most of the world and deal a heavy blow to its economy.

But on Thursday, the United States and the European Union opted not to cut Russia off from SWIFT while leaving the door open to revisiting the possibility.

Al Jazeera takes a look at the payment system and its relevance to the crisis in Ukraine.

What is SWIFT and what does it do?

SWIFT is a network used by banks to send secure messages about transfers of money and other transactions.

More than 11,000 financial institutions in nearly 200 countries use SWIFT, making it the backbone of the international financial transfer system.

Who owns SWIFT?

SWIFT is a cooperative company under Belgian law. On its website, it says “it’s owned and controlled by its shareholders [financial institutions] representing approximately 3,500 firms from across the world”.

The system is overseen by the G10 central banks, as well as the European Central Bank, with its lead overseer being the National Bank of Belgium.

What is the relationship between SWIFT and Russia?

According to the Russian National SWIFT Association, Russia has the second-most users after the US, with some 300 Russian financial institutions belonging to the system.

More than half of Russia’s financial institutions are members of SWIFT.

Alicia García Herrero, chief economist for the Asia Pacific at Natixis in Hong Kong, said banning Russia from SWIFT would be a serious blow to the country.

“[It’s a big deal] since no debt or trade finance payments can be made. It is bigger than stopping EU imports of gas from Russia,” García Herrero told Al Jazeera.

What has Russia said?

Nikolay Zhuravlev, vice speaker of the Federation Council, acknowledged in January that the country’s ejection from the network was a possibility.

“SWIFT is a settlement system, it is a service. Therefore, if Russia is disconnected from SWIFT, then we will not receive [foreign] currency, but buyers, European countries in the first place, will not receive our goods – oil, gas, metals and other important components of their imports. Do they need it? I am not sure,” Zhuravlev said, according to the TASS Russian agency.

Zhuravlev also noted that while SWIFT is convenient, it is not the only way of transferring money, and a decision like suspending a country would need unanimity among members.

“SWIFT is a European company, an association which involves a lot of countries,” Zhuravlev said.

Is Russia’s suspension from SWIFT a credible threat?

Tactically, “the advantages and disadvantages are debatable”, Guntram Wolff, director of the Brussels-based Bruegel think-tank, told the AFP news agency.

In practical terms, being removed from SWIFT would mean Russian banks could not use it to make or receive payments with foreign financial institutions.

Western nations threatened to exclude Russia from SWIFT in 2014 following its annexation of Crimea.

But excluding such a major economy – Russia is a significant oil and gas exporter – could have significant consequences for other countries, too.

Netherlands Prime Minister Mark Rutte on Thursday acknowledged that a ban was “sensitive” for some EU countries as it would have an “enormous impact on ourselves.”

“Operationally it would be a real headache,” said Wolff, adding the impact would be especially great for European countries which do significant trade with Russia, which supplies 41 percent of the continent’s natural gas.

Herrero said excluding Russia would be costly “for bondholders, EU banks and energy importers”.

Such a ban could also spur Moscow to accelerate the development of an alternative transfer system, with China, or other countries, potentially undercutting US dominance of the financial system.

Source: https://www.aljazeera.com/news/2022/2/25/what-is-swift-could-be-used-punish-putin

Interesting read

The Kremlin dwarf would only lead Russians to destruction!

The impact of the sanctions will mostly be felt by citizens as it has been before.

The oligarchs looting the country dry will always find their way out.

China launched its Cross-Border Interbank Payment System (CIPS) in 2015, using the yuan. Russia developed its System for Transfer of Financial Messages (SPFS). To build an independent Russian-Chinese financial system by linking the two should not be a problem. The main question is to choose the standard currency – possibly the yuan.

Once the system is up and running, that’s perfect for Iran, which badly wants to increase trade with Russia but remains handicapped by US sanctions. Iran has already signed trade agreements and is involved in long-term strategic development with both Russia and China.

olas24u:
China launched its Cross-Border Interbank Payment System (CIPS) in 2015, using the yuan. Russia developed its System for Transfer of Financial Messages (SPFS). To build an independent Russian-Chinese financial system by linking the two should not be a problem. The main question is to choose the standard currency – possibly the yuan.

Once the system is up and running, that’s perfect for Iran, which badly wants to increase trade with Russia but remains handicapped by US sanctions. Iran has already signed trade agreements and is involved in long-term strategic development with both Russia and China.

Interesting...

Russia already saw this coming so the sanctions will likely not affect Russia as much as it would if they didn't have that relationship with china. The impact can be determined with how economically powerful china is and also Africa will have influence on the next world power which will likely be china knowing how indebted we are to them

Unfortunately no be only russia go suffer from the mumu sanctions

G

In the end, it's the citizens that will suffer the impact. Imagine pornhub blocking Russia. What's Putin's business with pornhub?

These sanctions will be suffered by innocent Russian citizens. The elite will keep swimming with their money in comfort and luxury.

When two elephants fights, it's the grasses that suffer.

If the West cared about Ukrainian citizens, they would have sworn in the help defend their bothers. But of course, they seek their interest first and analyse the risks to know if it's best.

Let's just hope it doesn't escalate to a full-blown nuclear war. They have their bunkers stocked with food that can last them for years.

Nah we go suffer am las las

Russia is a huge export economy, more especially it's Gas, Removing them from Swift, will seriously affect other countries that are dependent on imports from Russia. Similar move was made on Iran around 2014, which nearly crippled their economy. I hope Putin will put an end to this destruction. Anyway na their problem.

This war between Ukraine and Nigeria, made me realize that Nigeria will never develop, the commenters are all emotional, and selfish, SMH.

All these things we are here saying, people are dying in Ukraine at the moment. The world should find a way and put a bullet in Putin's skull and everything will be over. SIMPLE!

Lol as in individual in Nigeria u no fit du Swift transfer for here don't know abt corprate bodies oh buh dem go tell u CBN policy no support am...


So I don't know if e go affect dem cos we for diz side don move on....

olas24u:
China launched its Cross-Border Interbank Payment System (CIPS) in 2015, using the yuan. Russia developed its System for Transfer of Financial Messages (SPFS). To build an independent Russian-Chinese financial system by linking the two should not be a problem. The main question is to choose the standard currency – possibly the yuan.

Once the system is up and running, that’s perfect for Iran, which badly wants to increase trade with Russia but remains handicapped by US sanctions. Iran has already signed trade agreements and is involved in long-term strategic development with both Russia and China.

Interesting…
Thanks for this information. Odinson1 doesn’t know this one.

CoronaVirusPro:
The Kremlin dwarf would only lead Russians to destruction!

The impact of the sanctions will mostly be felt by citizens as it has been before.

The oligarchs looting the country dry will always find their way out.

continue with your western propaganda trash.... USA did worst in middle east nothing happened...

Majority of people dont really understand the Russian-Ukraine fight......for the layman, see pic for illustration

Ask his nairaland urchins

Ok

I don’t think most Nairalanders know what these sanctions , Biden got world leaders that can’t even agree on a cup of coffee to agree in sanctioning Putin . Biden reported about this invasion before it was a thing, and same people are about getting russia kicked out of SWIFT.

1 dollar was worth 76 Russian rubble last week but currently today its worth 83 Russian rubble to a dollar, and the sanctions haven’t even really kicked in yet. You Nairaland urchins keep praising Putin not realizing he is loosing massively . His last card is nuclear weapon, and that will be his demise/death. So I ask again to the idiots shilling this guy, how is Putin winning this in anyway, what’s he doing to warrant that stupid supports he gets only here on Nairaland by few Nigerians in nigeria?

Putin Putin. I even thought the guy had balls.

Few days into a fight he started, he is already looking at playing his last card, threatening nuclear war. Over ordinary sanction?

He whom the gods want to destroy, they first make 'MAD'

Russia’s demands to me are credible in my opinion. You can’t allow a breakaway region to flirt with the west knowing how susceptible their boundaries are with Russia. Though this is debatable, but you need to realize that the west have been having a free ride in this case scenario!

When the US went into Iraq, Afghanistan, Libya nobody sanctioned them or anything. The US should be cautious in this situation. Putin is like a mad man with a lighter in a gas station.

Now some of the people shouting swift this swift that can obviously see that it has both advantage and disadvantages to Western countries that's y they debated for long before removing russia

Russia against the world

Really?

Okay