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What is SWIFT banking system? Russia could be ejected over Ukraine invasion

As President Biden and other world leaders mull additional sanctions against Russia over its decision to invade Ukraine, one of the most severe proposals would sever the Kremlin’s access to the SWIFT international payments systems. The SWIFT system, or Society for Worldwide Interbank Financial Telecommunication, facilitates financial transactions and money transfers for banks located around the world. The system is overseen by the National Bank of Belgium and enables transactions between more than 11,000 financial institutions in more than 200 countries around the world. Without access to SWIFT, Russia and its financial institutions would be effectively cut off from most international business transactions. For example, Russia would be unable to secure profits from international sales of its oil and gas production — deals that comprise more than 40% of the country’s revenue. A SWIFT ban was not included in the latest round of sanctions that Biden outlined in a scathing speech Thursday in response to Russia’s invasion. However, the president said such a ban is “always an option” in the future. “The sanctions we’ve imposed exceed SWIFT. The sanctions we’ve imposed exceed anything that’s ever been done,” Biden said. “The sanctions we’ve imposed have generated two-thirds of the world joining us. They are profound sanctions.” ‘Declaration of war’ The economic consequences would be severe enough that some experts have likened a SWIFT cutoff to a “nuclear option” in terms of economic sanctions. When the US and allies considered a similar penalty against Russia following its takeover of Crimea in 2014, some Russian politicians suggested the action would constitute a declaration of war. Aside from drawing Russia’s ire, a SWIFT cutoff could have far-reaching consequences for the global economy — such as limiting access to fuel supplies during an ongoing energy crisis. Some experts have raised concerns that a cutoff could result in the formation of a rival global payments systems. Last week, National Economic Council deputy director Daleep Singh indicated an initial round of sanctions after an invasion was unlikely to include an effort to eject Russia from SWIFT. “All options remain on the table,” Singh said. “But it’s probably not going to be the case that you’ll see SWIFT in the initial rollout package. We have other severe measures we can take that our allies and partners are ready to take in lockstep with us, and that don’t have the same spillover effects.” How would it work? Cutting Russia off from SWIFT would require coordinated actions by the Biden administration as well as the European Union. The US successfully lobbied for the removal of Iranian banks from the SWIFT system in 2012 due to concerns over Tehran’s nuclear weapons program. While the European Union is set to introduce a new set of sanctions targeting Russia following its invasion of Ukraine, the upcoming tranche is not expected to cut the Kremlin off from SWIFT, Reuters reported, citing sources familiar with the matter. In a joint statement Thursday, the foreign ministers of Estonia, Latvia and Lithuania — three countries on the European Union’s border with Russia — called for a SWIFT cutoff to be implemented. “All of us in the whole international community need to condemn it in a strongest possible way, to impose strongest possible sanctions on Russia, including disengaging Russia from SWIFT, isolating it politically and be firm in our support to the sovereignty, territorial integrity of independent Ukraine,” the foreign ministers said. A US response And some US lawmakers, including Sen. Marsha Blackburn (R-Tenn.), have called on the Biden administration to push for a SWIFT ban in response to Russia’s actions. Biden implemented an initial set of economic sanctions against Russia earlier this week after Putin recognized two breakaway pro-Moscow regions in Ukraine as independent. The president has warned Russia would face “swift and severe costs” if it proceeded with an invasion. On Thursday, the president unveiled new sanctions on Russian exports, as well as the country’s banks and state-sponsored companies. Biden noted that a SWIFT ban was “not the position that the rest of Europe wishes to take” at the current stage

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