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    WebsCrypto—News—Business News—The United States, the European Union and Other Countries Have Announced to Ban Russian Banks From Using Swift
    Business News

    The United States, the European Union and Other Countries Have Announced to Ban Russian Banks From Using Swift

    By WebsCryptoFebruary 27, 2022
    The United States, the European Union and Other Countries Have Announced to Ban Russian Banks From Using Swift
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    On February 26, the United States, the European Union, the United Kingdom and Canada issued a joint statement announcing that some Russian banks were prohibited from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international settlement system.

    SWIFT, the Society for Worldwide Interbank Financial Telecommunication, has an unquestionable position in the field of cross-border fund settlement.

    SWIFT was established in 1973. More than 11,000 financial institutions around the world use SWIFT, and the system handles more than 42 million pieces of information (that is, the number of messages) every day. There are currently 466 financial institutions in Russia that are SWIFT members.

    If a country is excluded from the SWIFT system, it can be compared to a natural person being deleted from social media. SWIFT is therefore considered a “financial nuclear bomb” in sanctions.

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    Some experts believe that expelling Russia from the SWIFT system will be one of the most severe financial sanctions, which will cause a major blow to the country’s foreign trade and international settlement.

    By then, Russia will not be able to settle energy settlements with most European countries. European countries rely heavily on Russian gas supplies.

    SWIFT covers more than 200 countries and territories

    In order to adapt to global transactions, many Western countries established the SWIFT organization in the 1970s.

    Simply put, international settlements cannot bypass SWIFT. According to its published data, in the global payment currency ranking based on amount statistics, the US dollar and the euro are the main ones. According to the latest statistics, in January this year, the share of RMB in international settlements reached 3.2%, the highest in history, ranking fourth in the world after the US dollar (39.92%), the euro (36.56%), and the pound (6.30%).

    SWIFT’s messaging platform, products and services have connected with more than 11,000 banks, securities institutions, market infrastructure and corporate users around the world, covering more than 200 countries and regions. Headquartered in Belgium, SWIFT has branches all over the world, and its business covers almost all financial centers, so it has become the mainstay of the world’s financial communication industry.

    What does it mean to be excluded from SWIFT?

    With the rapid development of the global communication network, SWIFT is inseparable from practice. But what does it mean if a country is excluded from SWIFT?

    Since the current information transfer of global cross-border payment is basically realized through SWIFT, being excluded from SWIFT means that it will become very difficult to carry out cross-border payment settlement. Today, various countries have economic and trade relations with other countries to some extent, so this will have a great impact on the economic operation of the sanctioned countries.

    In 2012, the United States and Europe escalated financial sanctions against Iran and removed four important Iranian banks from the “Global Interbank Financial Telecommunication Association” system, causing Iran to lose nearly half of its oil export revenue.

    Why was the United States reluctant to implement the ban before?

    One reason is that the impact on Russian companies may be less severe. The head of VTB said recently that he could use other payment channels, such as mobile phones, apps or email. Russian banks can also make payments through countries that have not imposed sanctions. There are also concerns that it could damage the dollar’s status as the global reserve currency and accelerate the use of alternative currencies such as cryptocurrencies.

    The administration is also concerned that the ban could hurt its allies as much as it does Russian companies. Russia is a big buyer of foreign manufactured goods, especially from the Netherlands and Germany. Russia is a major supplier of crude oil, natural gas and solid fuels to the EU, and European countries may find it difficult to find alternative suppliers.

    DISCLAIMER: The information provided by WebsCrypto does not represent any investment suggestion. The articles published on this site only represent personal opinions and have nothing to do with the official position of WebsCrypto.
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