What is Swift and what would shutting Russia out of it achieve?
Russia’s invasion of Ukraine has amplified pressure for tougher economic sanctions on Moscow. The Labour leader, Keir Starmer, was among many to call for Moscow to be shut out of Swift – the world’s main international payments network – with the aim of hitting Russian trade and making it harder for its companies to do business.
Swift (the Society for Worldwide Interbank Financial Telecommunication) is the main secure messaging system that banks use to make rapid and secure cross-border payments, allowing international trade to flow smoothly. It has become the principal mechanism for financing international trade. In 2020, about 38 million transactions were sent each day over the Swift platform, facilitating trillions of dollars’ worth of deals.
Swift, founded in the 1970s, is a cooperative of thousands of member institutions that use the service. Based in Belgium, it remains neutral in trade disputes, being run principally as a service to its members.
Boris Johnson told MPs it would harm the Russian economy if it was locked out of Swift. Run-of-the-mill transactions would need to be conducted directly between banks, or routed through fledgling rival systems, adding to costs and creating delays.
One reason is that the impact on Russian businesses might not be so serious. The head of a large Russian bank, VTB, said recently he could use other channels for payments, such as phones, messaging apps or email. Russian banks could also route payments via countries that have not imposed sanctions, such as China, which has set up its own payments system to rival Swift. A ban on Russia using Swift could accelerate a the use of China’s rival Cips system. There is also a fear that it could damage to the US dollar’s status as the global
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