"If there is no SWIFT, there is no banking . . . relationship, it means that the countries are on the verge of war, or they are definitely in a cold war. The next day, the Russian and American ambassadors would have to leave the capitals" warned Andrei Kostin, Chief Executive of VTB, Russia's second-largest bank, while commenting on the issue, as cited by the Financial Times.
So what is SWIFT? SWIFT (The Society for Worldwide Interbank Financial Telecommunication) is a Belgium-based organization providing a network that enables secure communications between international financial institutions. The Washington Post characterizes it as "one of the core frameworks of international finance," emphasizing that the system plays a key role in global economy.
Russia joined the global interbank system in 1989 and is currently sending over 360,000 messages per day, making it one of the most active users of
Will exclusion from SWIFT deal a severe blow to Russia's economy? Unlikely, experts say. Disconnected from SWIFT, Russian businessmen will send their messages via other communications means, such as archaic fax machines and telexes. Yes, it would take more time but it would not halt Russia's financial transactions.
On the other hand, it would probably prompt the Russian banking sector to create a reliable alternative for SWIFT to ultimately shift to Eastern markets. As a result, the Belgium-based organization would lose a big customer and Western businesses will lose their market shares in Russia. Furthermore, in retaliation for the ban Moscow might seize Western assets in Russia, amounting to $3-$5 trillion, according to some estimates. Meanwhile, in December 2014, Russia's Central Bank initiated development of a new payment system in order to diminish Western financial dominance over Russia. Thus far, the decision to disconnect Russia from SWIFT would inevitably lead to what Andrei Kostin qualified as an economic "war."
Will SWIFT disconnect Russia? Pointing to the earlier fact that SWIFT stopped facilitating transactions for Iranian banks, the Washington Post suggests that the Belgium-based organization could impose sanctions on Russia "if it is told to." However, the European organization holds a different opinion from that of the US media outlet regarding the issue.
In October 2014, SWIFT stressed it had "no authority to make sanctions decisions," and expressed regrets about the pressure from Western policy-makers. SWIFT has repeatedly proclaimed itself an "apolitical" entity. At the same time, European leaders admit that such a measure would not prove effective. According to Reuters, the European Commission is not considering Russia's exclusion from SWIFT "because it could lead to the creation of an alternative system by Russia and other countries that could harm the Belgian-based global clearing house."
"We have heard signals that sanctions could be extended and expanded. We consider them senseless and harmful for everyone," stressed Russian Deputy Prime Minister Arkady Dvorkovich, as cited by Reuters.
