President Biden on Thursday said the United States and Europe were united in an effort to confront Russia’s aggression toward Ukraine with harsh sanctions. However, there is one area where he proposes to disagree: Fast.
The Belgian messaging service, officially known as the Association for Global Interbank Financial Telecommunication, connects more than 11,000 financial institutions around the world. It is seen as a potential nuclear option in the sanctioned world because if Russia removed Swift, the country would be essentially cut off from much of the global financial system.
But doing so would not be simple and could come with costly complications for countries outside of Russia, many of which depend on its energy, wheat and other items. That has caused some countries to be uncomfortable pulling the trigger.
Swift is a global partnership of financial institutions that began in 1973 when 239 banks from 15 countries worked together to figure out how to best handle cross-border payments. It doesn’t actually hold or transfer money, but it does allow banks and other financial companies to notify each other of upcoming transactions.
Blocking Russia from Swift would limit its ability to conduct international financial transactions by forcing importers, exporters and banks to find new ways to transmit payment instructions. Given Europe’s reliance on Russia’s energy exports so much, some euro zone leaders are hesitant to take that step and risk those purchases, analysts say ways to make doing business with Russia more expensive and complicated.
Financial Times reported on Thursday that British Prime Minister Boris Johnson was pushing Russia to remove Swift, while German Chancellor Olaf Scholz said such a move should not be part of a European Union sanctions package.
Mr. Biden made the case on Thursday that sanctions imposed by the United States on Russian financial institutions would result in Russia’s removal from Swift. He said removing Russia from the platform was still “an option” but most of Europe opposed such a move at the moment.
“It’s always an option,” Biden said. “But right now, that’s not the position the rest of Europe wants to be in.”
The United States and Europe have disagreed over whether to remove Swift before, most recently in 2018, when the Trump administration wanted to cut off Iran’s access. Final, Swift cuts ties with Iranian banks for fear of violating sanctions against that country.
However, sanctions experts say Swift is often seen as an overkill tool, and that cutting access could actually backfire by forcing Russia to find alternative ways to get involved. global economy, including forging closer ties with China or developing a digital currency.
Russia’s Attack on Ukraine and the Global Economy
An increased concern. Russia’s attack on Ukraine could cause Energy prices skyrocketed and food and can terrify investors. The economic damage from supply disruptions and economic sanctions will be severe in some countries and industries and go unnoticed in others.
Emily Kilcrease, a senior fellow at the Center for a New American Security, said such action could boost Russia’s efforts to expand the use of its own financial messaging service and promote it moves closer to China.
“There is also the longer-term question of whether it is itself creating a lot of bad momentum for Russia,” Ms. Kilcrease said.
Michael Parker, a partner at the law firm Ferrari & Associates, suggests that blocking Russia from the Swift would likely open the door to other solutions, including finding alternative communication systems. A more effective first step, he said, would be to impose the banking sanctions Mr Biden announced on Thursday.
“To really cut off Russia from the American banking system or the global banking system, Russian banks would have to be sanctioned. And that’s what they did,” he said. “At the end of the day, this is a financial instrument – hitting their big banks to the extent that we can possibly go as far as first sanction.”
Emily Flittercontribution report.
https://www.nytimes.com/2022/02/24/business/russia-swift-financial-system.html Why didn’t the US cut Swift from Russia? It’s very complicated.