Time.news – It is one of the major bugbears of the Russian government and at the same time one of the tools against Moscow that most divides the Western chancelleries. We are talking about the exclusion of Russia from the Swift, the measure that seems to be the most incisive sanction that could be adopted against the Kremlin.
From the beginning Boris Johnson and Joe Biden waved it as the ace in the hole to lead to more mild advice Vladimir Putin, causing a number of distinctions between allies. Now, however, the hypothesis is gaining ground, invoked by the Ukrainian president himself, Volodymyr Zelensky.
What is the Swift
Swift is the acronym of Society for worldwide interbank financial telecommunicationand is the main messaging system in the world used by credit institutions to carry out monetary transactions between the various states in the safest and most transparent way, thus giving businesses and citizens a tool to make international trade work with the greatest guarantees and in the as smoothly as possible.
From an administrative point of view, it is a cooperative established in 1973 with headquarters in Belgium, and therefore falls de facto under European Community law. Specifically, it is a large IT network to which nearly 11,000 financial institutions from over 200 nations adhere.
In short, it is not a bank with capital, loans, collection and management of current accounts, but a platform that sends information to credit institutions on transactions that are taking place at a given moment. Defined as the ‘gmail’ of the international banking worldthe system provides each financial institution with an 8 or 11 character code, usually identified as a Bic code or alternatively as a Swift Code.
With these codes, it is ensured that the messages generated with a payment arrive – with the necessary certifications – to the creditor. The system is able to generate an average of almost 40 million messages per day, which correspond to as many financial transactions.
What happens with the exclusion of Russia from the Swift
Excluding Russia from the Swift would undoubtedly cause numerous financial problems and dysfunctions in the country as its financial entities could no longer send or receive money from abroad. However, the measure could prove to be a double-edged sword for those who imposed it and at the same time a not so dramatic initiative for Russian international trade.
First of all, the problem is that the ‘stop’ could also run into non-Russian financial institutions or banks, such as the Italian institutions which in Russia are among the most exposed in Europe together with those of France and Austria.
And then, as already announced by several representatives of the Moscow government, the country’s financial intermediaries could use alternative instruments to Swift. As early as 2014, following the invasion of Crimea, some local banks had been blacklisted by the United States.
The Russian central bank then developed its own payment system – Mir – which currently intermediaries about 25% of all domestic card transactions, but which is difficult to use abroad.
Subsequently, the Russian government developed another payment network – the System for Transfer of Financial Messages (Spfs) – which in 2021 brokered about 13 million messages between the more than 400 financial intermediaries participating in the system (including Unicredit and Deutsche Bank) for a total of 20% of domestic transfers.
In the event that Russian banks were disconnected from Swift, the Russian financial system could also rely on the Chinese cross-border interbank payment system (Cips), managed by the People’s Bank of China, which has users in over one hundred countries.