Sanctions, Russia outside the Swift international system?
According to CNN, the US is also considering the exclusion from the Swift system among possible sanctions for Russia
The threat of Swift exit for Russia returns.
There is also exclusion from the Swift system among the economic sanctions the United States is weighing in the event of a Russian invasion of Ukraine. This is what well-informed sources toldCNN .
Cutting Moscow out of the Swift system (Society for World Interbank Financial Telecommunications), the sources explained, would be the so-called "nuclear option".
Other countermeasures would hit the energy sector, Russian sovereign debt and oligarchs close to President Vladimir Putin, limiting their ability to travel abroad and access American banking and credit cards.
It is not the first time that the expulsion of Moscow from the Swift system has been discussed. Last spring, in a meeting with EU foreign ministers , the representative of Ukraine said he had called for a tough new package of sanctions, including the expulsion of Russian banks from the Swift network, which currently connects more than 11,000 banks operating in at least 200 countries and territories around the world.
But how are the penalties for exclusion from the Swift network triggered?
All the details.
SANCTIONS IN CASE OF ATTACK ON UKRAINE
The United States, together with the European Union, would already be ready to approve a sanction plan against Russia in the event of an attack on Ukraine, according to Politico .
A senior official in the Biden administration said that if Russia does not withdraw military forces on the Ukrainian border, the United States would be ready to take countermeasures that could damage the Russian economy. CNN reported it.
THE EXCLUSION OF RUSSIA FROM THE SWIFT SYSTEM
Among these, the possibility of disconnecting Russia from the Swift international payment system is being considered, two sources familiar with the matter told CNN . The European Parliament has already passed a non-binding resolution calling for a move if Russia invades Ukraine, CNN reports.
As mentioned at the outset, this is not the first time that this threat has emerged for Moscow.
The US threat to disconnect Russia from the Swift network has been hanging over Moscow's head for several years. The last dates back to spring.
RUSSIAN COUNTERFEIT?
The foreign ministry said last April that Russia needed to create its own blockchain-based alternative, The Moscow Times reported. The head of the Russian banking association has warned Swift against disconnection, calling it an act of "self-construction". At the time, experts argued that the chances of Russia being disconnected were slim. Furthermore, the likely impact on the country, while serious, may not be overstated.
WHAT IS THE SWIFT NETWORK
Founded in 1973, Swift is a global provider of secure financial messaging services, as noted on the site . It is a member-owned cooperative that connects more than 11,000 banks, financial institutions and companies in more than 200 countries and territories. It was founded to replace the telex.
The system, which facilitates fast and secure communications between financial institutions, is often mislabeled as a "payment system", but in reality it is a notification and communication network.
“Swift is essentially a messaging service. The money doesn't actually flow through the Swift network, which is what many people don't realize, ”Brian O'Toole, a member of the Atlantic Council told The Moscow Times last April.
THE CONSEQUENCES FOR MOSCOW
"Removing Russia from the Swift system would have significant negative implications for Russia's investment environment and export sector," Scope Ratings director Jakob Suwalski told the Moscow Times.
“If Russia were disconnected from Swift today, there would be a big impact, let's not minimize it. But taking them off doesn't exclude them from US banks, because Russian institutions can use Telex or another form of financial messaging. There is too much economic activity at stake for those banks not to resort to other methods, ”he added.
"By itself, disconnecting Russian banks from SWIFT only means increasing costs and slowing down financial transactions," said Oleg Bogdanov, chief analyst at QBF investment firm. “Traditional connections will be broken and it will take some time to restore them. But it can be done in a week or two ”.
HOW THE NETWORK WORKS
Swift is a co-operative company under Belgian law and is controlled by its shareholders (financial institutions) representing around 3,500 companies from around the world. The shareholders elect a Board of 25 independent Directors, representing banks from around the world, which governs the Company and oversees the management of the Company. The Executive Committee is a group of full-time employees led by the Chief Executive Officer.
The G-10 central banks (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, the United Kingdom, the United States, Switzerland and Sweden) as well as the ECB oversee the network.
HOW SWIFT WORKS IN CASE OF SANCTIONS
As The Moscow Times pointed out, the decision to exclude Russia from the Swift system does not rest with the United States.
All decisions on the legitimacy of financial transactions under applicable regulations, such as sanctions regulations, rest with the financial institutions that manage them and their competent international and national authorities, the Swift website reads.
As he explains on the website, Swift is incorporated under Belgian law therefore it must comply with the relevant EU legislation, as confirmed by the Belgian government. As a utility with a systemic global character, Swift does not have the authority to make sanctions decisions. Any decision to lift sanctions against countries or individual entities rests solely with the relevant government bodies and legislators.
Any action against Moscow would therefore require new steps from the EU.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/sanzioni-russia-fuori-dal-sistema-internazionale-swift/ on Wed, 08 Dec 2021 08:59:36 +0000.