Created in 1973, this financial information exchange system is the most widely used in the world. Iran’s exclusion in 2012 and 2018 had major repercussions on the country’s economy.
The United States and the European Union followed suit. As Russia gave the green light to a military operation in Ukraine, the West immediately responded with a series of sanctions. Germany has suspended the North Stream 2 gas pipeline, financing the country’s sovereign debt, visa bans and barring Russian officials from accessing financial markets who are losing their assets to certain Russian figures.
The first solution to retaliation, which could lead to others, has already alerted US and European authorities. Among the ways considered by both sides of the Atlantic is the exclusion of Russian companies from the Swift interbank network. The threat described by the United States as a “nuclear weapon.”
“We really do not want to go that far and resort to it, but if we have no choice, Russia will attack its neighbors, kill people, occupy territories, and if we want to stop it, this tool will work. Last attempt,” said the former US special envoy to Ukraine last December. Ambassador Kurt Volker explained. The world.
Swift stands for Society for Worldwide Interbank Financial Telecommunications. Based in La Holbe, Belgium, south of Brussels, it is a global partnership formed in 1973 on the initiative of 239 banks from 15 major countries. Specifically, it is an automated messaging system that allows banks and financial institutions to facilitate money transfer around the world. Swift does not hold or transfer money directly. It sends debit and credit information to two banks involved in a transaction.
When Engie buys gas from Gazprom for 1000 euros, the French bank debits the amount and sends the information to Swift, which sends the payment order to the Russian gas company’s bank. The latter feels it after a few days.
Swift Service is an essential provider of financial information exchange in global business. It now connects more than 11,000 financial institutions worldwide and makes 42 million orders a day (in 2021), i.e. almost 500 per second.
What will be the consequences for Russia if Swift is excluded?
So far, only Iran has been excluded from the Swift system. In 2012, following the revival of Iran’s nuclear program, co-directors fired 30 Iranian financial institutions in line with EU sanctions.
A withdrawal that had a major impact on the economy of the Islamic Republic.
After the severance of Iranian banks from Swift, the country lost almost half of its oil export earnings and 30% of its foreign trade. Note from Carnegie Moscow Center. The impact on the Russian economy will be equally devastating, especially in the short term. “
In 2014, when the United Kingdom had already threatened to exclude Russia, the then Russian finance minister estimated that such a decision would lead to a 5% drop in the country’s GDP.
“Russia relies heavily on Swift for billions of US dollars worth of hydrocarbon exports, the Carnegie Moscow Center recalled. The cut will end all international transactions, trigger currency fluctuations and massive capital outflows.”
Certainly, Swift’s exit will complicate and greatly slow down the flow of funds with Russian banks’ Western allies. They have to go manual ways or find alternative ways for their communication.
Can Russia be unleashed from Swift?
Officially a non-political organization, Swift hosts A board of directors consisting of 25 independent directors From countries that contribute financially to the service. For example, two French people sit on this council. Like Iran in 2012 and 2018, if the EU or the US decides to allow Russia more harshly, these executives may exclude Russia.
Dmitry Medvedev, currently the deputy chairman of Russia’s Security Council, does not believe. When he was prime minister when Crimea was annexed in 2014, he considered Swift’s exemption to be considered a “declaration of war.”
Today, Vladimir Putin’s strongest is the most moderate.
“I’m going to be blunt, I do not believe anyone will cut us off from this because it will not do anyone any good, including this system, especially since we have a large number of transactions,” he said in January. Russian news agency TASS.
In case of doubt, the country is prepared for it and has developed alternatives. In the wake of the 2014 threats, the Bank of Russia created the SPFS system, which provides a Swift-like service. Although all Russian financial institutions are a part of it, only about twenty foreign banks use this service, none of which are in the United States and very few in the European Union. The Russians are trying to integrate their organization with the equivalent Chinese service.
Russia is more confident in eliminating Swift than it was in 2014.
“Yes, it will be very difficult, it is obvious, but it will not be a disaster,” Dmitry Medvedev promises. The same goes for payment methods. For example, if we are talking about credit cards, they will always work within the country. In international transfers – yes, there will be some difficulties in this regard. But we have our own mir cards, you know, they can also be used as analogs. “
Threats that no longer threaten Russia, especially Russia’s withdrawal from Swift, will result in fines for European and especially French companies. Many French companies are based in Russia, starting in Société Générale and one of the 10 largest banking institutions in the country in terms of assets under the management of its subsidiary Rosbank. Swift’s exit will complicate the financial transaction between the Moscow subsidiary and Paris. Tito for Renault, Total Energies, Decathlon or Leroy-Merlin firmly established in Russia.
France has been the first or second foreign investor in Russia for many years. French companies employ 160,000 people in the country.
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