Ukrainian President Volodymir Zelensky has called on the international community to exclude Russia from the Swift system. A sanction that could have an impact on the Russian economy but also on the world.
After Russia invaded Ukraine, Westerners decided to apply new sanctions against Vladimir Putin’s country at a late meeting on Thursday, February 24. The Ukrainian president said the sanctions were insufficient.
The EU and the United States are keeping in mind another sanction, qualified “financial nuclear weapon”which could hit the country hard: the exclusion of Russia from the messaging system Swift Interbank.
A package of additional tough sanctions against Russia from the EU is approaching. Discussed all the details with @EmmanuelMacron. We demand the disconnection of Russia from SWIFT, the introduction of a no-fly zone over Ukraine and other effective steps to stop the aggressor.
— Володимир Зеленський (@ZelenskyyUa) February 24, 2022
Swift, what is it?
The Swift (acronym of Society for Worldwide Interbank Financial Telecommunication) is a cooperative society based in Belgium and founded in 1973 by the main world banks.
Its role is to simplify the exchange of payment orders between different banks around the world, through automated and secure messaging. Swift does not transfer funds but allows banks to be notified of exchanges that affect them.
The company works for 11,000 financial institutions, present in more than 200 countries. Every day, more than forty million messages pass through Swift.
What are the risks for Russia?
According to Carnegie Moscow Centera Moscow-based think tank, the exclusion of Russia would have a “devastating” impact on the country’s economy. Concretely, if the sanction were applied, Russian banks would have great difficulty in carrying out financial exchanges with other international banks.
Russian banks could then fall back on alternative solutions to carry out transactions with foreign countries, but necessarily more long and more expensive.
In 2014, during the annexation of Crimea, the hypothesis had already been considered. The former Russian finance minister then estimated the impact of the measure at 5% of Russian GDP.
What consequences for the global economy?
If the sanction could penalize Russia, it would also have repercussions on the world economy, and in particular in France. Several companies in the territory have economic interests in Russia. As recalled by Directorate General of the TreasuryFrance is the second largest foreign investor and the largest foreign employer in the country, with 160,000 employees.
Excluding Russia from Swift could also have an impact on energy prices. “If Russia is disconnected, we will not receive foreign payment, but our buyers, the European countries in the first place, would not receive our goods: oil, gas, metals and other imported products”, warned the Russian Senator Nikolay Zhuravlev, in an interview with the TASS agency.
France has shown itself in favor of excluding Russia from the system, via a press conference by the Minister of the Economy Bruno Le Maire this Friday, February 25.
The Europeans expect in the next few hours an assessment by the European Central Bank of the consequences of such a decision, he added.