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Ukraine war: Russian banks to be cut off from SWIFT international payments system, says EU chief

Demonstrators hold placards while protesting Russia's military operation against Ukraine during a rally on the place of the United Nations in Geneva, Switzerland, on Saturday
Demonstrators hold placards while protesting Russia's military operation against Ukraine during a rally on the place of the United Nations in Geneva, Switzerland, on Saturday Copyright Credit: AP
Copyright Credit: AP
By Euronews
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The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a high-security intermediary system that allows banks and institutions around the world to carry out financial transactions – that is, ordinary payments – among each other.

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Russian banks will be removed from the SWIFT international payments system, says EU chief Ursula von der Leyen.

She said the move would "stop them from operating worldwide and effectively block Russian exports and imports".

However, von der Leyen did not say how many would be cut off, only saying a "certain number" of banks would be affected.

Von der Leyen, president of the European Commission, said the move had been agreed in coordination with other countries including the US, UK and Canada.

Other measures announced late on Saturday evening include stopping Russian oligarchs from using assets in EU financial markets.

EU leaders have already approved two rounds of sanctions that target Russia's financial, energy and transport sectors, tighten export controls, including semiconductors, and restrict visa issuance. The penalties also include travel bans and the freezing of assets of President Vladimir Putin's inner circle.

Earlier on Saturday, Ukraine's president, Volodymyr Zelenskyy, urged for Russia to be removed from SWIFT and his country to be allowed to rapidly join the EU.

What is SWIFT and why is it so important?

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a high-security intermediary system that allows banks and institutions around the world to carry out financial transactions – that is, ordinary payments – among each other.

The system was founded in 1973 and is headquartered in La Hupe, Belgium.

Today, SWIFT links more than 11,000 financial institutions in more than 200 counties and territories, making it an essential piece of our globalised, fast-paced economy.

Crucially, SWIFT is used by EU member states to pay for Russian gas and oil, two resources that represent the backbone of the Russian economy.

Since the EU is Russia’s number one energy client, many are now calling for the country’s expulsion from SWIFT in order to deprive Moscow of the much-needed funds to sustain the ongoing invasion of Ukraine.

"If Russia is no longer able to actively participate in the international financial system, that has a major impact," Fabian Zuleeg, Chief Executive at European Policy Centre (EPC), told Euronews.

"It makes it very difficult to run financial institutions within Russia and it cuts off, very effectively, from outside finance. So, I think this is a move that would have helped."

Why is expelling Russia from SWIFT considered risky?

But the move is risky. A total expulsion from SWIFT would mean that virtually all EU-Russia trade would come to a sudden halt, disrupting a significant part of the bloc's economy.

Russia is the EU's fifth-largest trade partner: in 2020, total trade in goods between the two amounted to €174.3 billion, of which €79 million were EU exports, according to the European Commission.

If this enormous amount of money were to disappear overnight, member states would feel the pain in an instantaneous and painful way. Gas prices would skyrocket, sending consumer bills to impossible highs and forcing many factories to stop production altogether.

“[SWIFT] is always an option. But right now, that’s not the position that the rest of Europe wishes to take,” said US President Joe Biden when asked about the possibility.

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"If Russia is disconnected from SWIFT the economy will implode, it will be a catastrophe for the Russian economy. And if the major oligarchs are sanctioned, then Putin's own wealth would be wiped out, and would be completely inaccessible. And those are two very material things to Vladimir Putin," said financier Bill Browder, head of the Global Magnitsky Justice Campaign, named after his former lawyer who was murdered in a Russian jail.

"Does he [Putin] stop attacking Ukraine on the day that happens? Surely not. But does it put him in a position where everything that he's worked for, for the last 20 years, has been sacrificed, surely yes. And at that point we are then in a position where we have some leverage," Browder told Euronews.

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