three questions about the Swift system, presented as the lethal weapon against Russia

What sanctions after the invasion of Ukraine by Russia? The Ukrainian president on Thursday, February 24, asked the international community to exclude Russia from the Swift interbank messaging system, a decision considered a lethal weapon against the Russian economy. “We demand to exclude Russia from Swift and introduce a no-fly zone over Ukraine”, Volodymir Zelensky said on Twitter after a telephone interview with Emmanuel Macron. His American counterpart, Joe Biden, felt that it remained “an option” to sanction Moscow. He pointed out, however, that“currently this was not (a) position” shared by Europeans

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Franceinfo explains what this essential cog in global finance consists of.

1What is Swift?

Swift is the acronym for Society for Worldwide Interbank Financial Telecommunication. This cooperative society is based in Belgium, in La Hulpe, near Brussels. It was founded in 1973 by the world’s leading banks. This is an intermediary whose principle is simple: replace the telex with an automated messaging system for writing and sending payment orders between different banks all over the planet. Swift does not hold or transfer the funds, but allows banks to be informed of the exchanges that concern them. It now connects more than 11,000 institutions*, present in more than 200 countries. In 2021, it transmitted an average of 42 million messages per day.

2What would be the consequences for Russia?

The international community has already blocked a country from using Swift. In 2012, the company expelled 30 Iranian institutions, including its central bank, in line with European Union sanctions against the Islamic Republic and its nuclear program. After the Iranian nuclear agreement signed in 2015, Tehran was reconnected to the system, then disconnected again when the United States imposed new sanctions, under the leadership of Donald Trump, in 2018.

According to the Carnegie Moscow Center*, Iran has lost almost half of its oil export revenues and 30% of its foreign trade as a result of these disconnections. For this Moscow-based international think tank, the impact on the Russian economy would be “equally devastating” : “Russia is heavily dependent on Swift because of its billions in dollar-denominated hydrocarbon exports.”

Russian banks could fall back on the national system for banking exchanges in the country. However, they would have great difficulties internationally. “The economic impact would be serious and immediate”abounded in December an American diplomat in the columns of the World. In 2014, when the threat of this sanction was brandished after the invasion of Crimea, the Russian finance minister at the time estimated the impact of such a measure at 5% of Russian GDP.

The Russian authorities minimize a possible impact. “Yes, it will be more difficult, that’s obvious, but it wouldn’t be a disaster”, assured former President Dmitry Medvedev. Nearby New York Times*an expert on Russia, Maria Snegovaya believes that “it won’t be as painful for Russia as Westerners imagine”.

3What would be the risk for the global economy?

The problem for the international community is that Russia would not be the only ones to suffer from this sanction. “The Russian economy is a whole other story. It’s double any economy already sanctioned by the United States”analysis with the New York Times*Adam Smith, a former Minister of the Economy under Barack Obama.

France, for example, has many economic interests in the country. As the National Directorate of the Treasury reminds us, France is the second largest foreign investor in Russia and the largest foreign employer, with 160,000 employees of French companies. Societe Generale owns Rosbank, one of the main Russian banks.

In recent days, Russia has warned the international community of a backlash. “If Russia is disconnected, we will not receive foreign payment, but our buyers, primarily European countries, would not receive our goods: oil, gas, metals and other imported products”, warned Senator Nikolay Zhuravlev in an interview with TASS*. This could result in higher energy prices in Europe.

* All links followed by an asterisk are in English.


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