The SWIFT reaction to Russia’s attack on Ukraine won’t hit Russian banks too hard

By Binoy Kampmark

March 6, 2022

SWIFT-Russia
Demonstrators demanded that Russia be cut off from the SWIFT system in front of the German embassy in Prague, Czech Republic. (CTK via AP Images)

Excluding countries, and more precisely banks and financial systems, from the use of the SWIFT monetary transfer system, is a proposal that has received some attraction over the years. The reason lies in the sheer influence the system purportedly exerts. The Society for Worldwide Interbank Financial Communications is a Belgian-based consortium spanning 11,000 financial institutions across 200 countries, an arterial centre for commerce and communications. Last year alone, it processed a daily average of 42 million transactions.

As the war between Russia and Ukraine continues its bloody momentum, announcements have been made about knocking off various Russian banks from the club. The list is likely to be an evolving one.

This is all part of a sanctions package cobbled together by the European Commission, the UK, France, Germany, Italy, the US. All have agreed to impose four critical measures upon Russia that come under the broad umbrella of economic sanctions. The removal of selected Russian banks from the SWIFT system was first and foremost. The Russian Central Bank was also limited in using its reserves in any manner that might be seen to undermine the sanctions regime. Doing so would limit its means in boosting the rouble in the event of currency fluctuations.

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