A Call to Buck Russian Banks

An explainer on SWIFT, which could help isolate Russia’s financial sector.

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After Russian President Vladimir Putin launched his invasion of Ukraine Thursday, the heads of the Baltic states—Latvia, Estonia, Lithuania—joined Ukraine in calling for leaders to cut Russia out of an international bank communications system.

But what is the Society for Worldwide Interbank Financial Telecommunication, or SWIFT?

SWIFT, founded in 1973, is the messaging network through which banks communicate with each other so they can transact payments. It’s especially important for communicating in international transactions. “It’s the cans and the strings by which banks communicate to settle trade and transfers,” Hudson Institute Senior Fellow Marshall Billingslea tells The Dispatch. Cutting Russia off from SWIFT would cut its banks off from the 11,000 other other banks in the network from more than 200 countries.

In 2019, SWIFT facilitated more than 33 million intrabank messages per day, according to its 2020 annual report.

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  1. Avatar photo
    Show Jay Janney the 🚪!

    For years there has been discussion about how China would love to dethrone the dollar. They have generally been supportive of alternatives to SWIFT. If we kick out Russia, who's to say one of the alternatives won't welcome Russia in, with China's support?

    Until Europe has an alternative to Russian gas, Putin thinks he will win.

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  2. M M (Lee)

    Why can't the US cover the costs for Italy and Germany initially so that we can enact Swift immediately? Obviously there is enormous corruption in those countries (e.g. Gerhard Schroder) which is blocking our defense against Putin. Surely the honest politicians in those countries could override the corrupt politicians with the backing of US financial support.

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  3. Kyle B

    Correct me if I’m wrong but swift seems drastically more severe than what Biden has done. The fine print on the banking sanctions don’t even take effect for 30 days, and the energy carve out is enormous. Add to that some dubious “re-categorization” of businesses into energy and you have a toothless tiger.

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  4. Jeff

    This post from the BBC live blog put it well that cutting Russia out of SWIFT may not be all that productive in reality. It certainly may not be the “Mother of All Sanctions” as some media outlets have described it as:

    “570:57
    What would Swift sanctions mean for Russia?
    President Joe Biden and German Chancellor Olaf Scholz have both said that cutting Russia off from the global banking system, Swift, is not being proposed right now.

    But what would happen if it was?

    Excluding Russia from Swift would risk severe repercussions for banks that are owed money - either now or in the longer term.

    This is particularly true in Germany, which has deep financial ties with Russia and feels it has done its share of economic sacrifice by suspending certification of the Nord Stream 2 pipeline.

    Although being de-Swifted would be disruptive for Russia, there is an alternate system - called CFPS - that Russia set up after it annexed Crimea in 2014. Similarly, China has also set up a secondary system, CIPS.

    Expelling Russia would probably only push it closer to China and play into the hands of the Xi administration, which is keen to "de-dollarise" the world's financial architecture. This would accelerate that trend and ambition.”

    Link:
    https://www.bbc.com/news/live/world-europe-60454795

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  5. Avatar photo
    Show Jay Janney the 🚪!

    SWIFT will hurt Russia quickly. While it sounds fun to freeze Putin's Ass(ets) off, He's got enough squirreled out of sight that he'll be fine either way .

    Shutting off their exports pushes the cost onto the people, who might well oppose Putin over this. But they are suffering already, so it gets dangerous there.

    Ukraine rebels need to set IEDs along the road to Kyiv, sending the tanks back to Moscow in pieces. If I were Ukraine, i'd bomb the Belarus and Ukraine gas pipelines. That'll get Rat Putin's attention quickly enough

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  6. Don Harban

    There is likely a tactical advantage in refraining from SWIFTing Russia at this moment. If I understand how it functions, it is a necessary link for making payments to Russia for the energy it currently is STILL supplying to Europe. Cut off SWIFT -- cut off the gas.

    While that has a certain appeal to some of us, it is certainly understandable that some Europeans who depend heavily on gas during the winter might not be particularly warm to the idea.

    On the other hand, the main heating season will be over in a few weeks and, at least for most of the rest of the year, cutting off Russian gas sales may become more of an inconvenience to Europeans than an existential threat.

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  7. Avatar photo
    Pat Riot

    The important thing that happened yesterday--and the thing that probably scared the living shit out of Putin--was that after Biden spoke US MARKETS REVERSED THEIR GAINS AND RALLIED.

    What Putin is afraid of is that we can screw over the Russian economy while *our* consumers feel almost nothing.

    If the sanctions are painful to *our* consumers, then Putin's agents like Tucker Carlson in the US (and he surely has other defacto agents in other countries) will start to demagogue the situation and build resentment around the sanctions, getting their governments to drop them.

    Recall that the tactical goal of Russia's influence operation in the 2016 election was **getting the US to drop the sanctions** which is what Trump promised when the Russian spy asked him about them at that speech in 2016:

    https://www.vox.com/2018/7/19/17581354/maria-butina-russia-nra-trump

    Make no mistake, sanctions *hurt* Putin. They are counting on their ability to get us to drop the sanctions in order to get away with what they have done.

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  8. Avatar photo
    Bill B

    I tend to think we should eject Russia from SWIFT also and probably do a number of other things. But then I don't get national security and intelligence briefings every morning.

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  9. Avatar photo
    Nick H

    Why have we refrained from sanctioning Putin directly? He's the one calling the shots in Russia, and he should be the one feeling the pain for his actions.

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    1. Avatar photo
      Pat Riot

      Apparently this is standard diplomatic tactic: you don't go after the head of state so you can keep an open dialog in order to be able to negotiate. We may get there with Russia but that would be an even more severe escalation given that we need Russia for things like Iran and arms control talks.



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      1. Avatar photo
        Victor Clairmont

        We tried it during Crimea. Gradual escalation. It didn't work.

        We don't need standard, we need extreme pressure so I disagree with this administration here.

        Biden needs to dump everything now that he can. Kiev may fall within a week. We need to give them more reasons to keep fighting a counterinsurgency, even if it hurts our economy more.

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  10. Avatar photo
    Victor Clairmont

    Absolutely.

    Cut him off.

    If Europe needs more oil or gas, allow fracking and drilling on federal land in America again which this current administration short sightedly stopped the first month of his administration.

    You want a way to help out our economy which is reeling under inflation and price surging? While hurting the Russians and helping Europe?

    This is it.

    We will suffer in the short term, but once we get the refineries going and can get Europe dependent on us and other Allie’s nations for safe and cleaner gas or even dirty oil, Putin’s wells will dry up eventually when no one outside of Russia is buying.

    Absolutely do it.

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    1. Avatar photo
      Paul Reichardt

      My spellchecker keeps changing “allies” to “Allie’s” too. Annoying. Glad it’s not just me.

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      1. Avatar photo
        Victor Clairmont

        Yeah it's a real pain.

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    2. Avatar photo
      Dante Longfellow

      I share your sentiment, but fear that if Russia is cut out of SWIFT that China will set up a parallel system to challenge it.

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      1. Avatar photo
        PaulH

        How much does it matter if China sets up a parallel system? And, in any case, it will take them a long time to do so and who would adopt it? Western bank regulators could prohibit banks in their countries from using the Chinese system.

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      2. Avatar photo
        Victor Clairmont

        Let them challenge it. It's a Cold War.

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      3. Eric L

        Russia already has a parallel system, that could likely be expanded to include China if China wanted to take it over.

        https://en.wikipedia.org/wiki/SPFS

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