SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, is a global financial system that allows for smooth and fast transfer of money is the world’s top fund transfer network. SWIFT connects the economies of top financial players in the International economic system.
Founded in 1973 and headquartered in Belgium, SWIFT links 11,000 member institutions in America, Europe and across the world. On records, 40 million transactions are processed via the financial system daily, which allows for timely and accurate conduct of monetary transactions.
The economies of more than 200 countries are highly interconnected to the standardised system as well as financial institutions, commodities and securities traders.
Each member of SWIFT is identified by its Bank Identifier Code (BIC) which ensures that money transfers are paid into the correct account. If a BIC code is blocked, the erring member is shut out of the payment network.
The SWIFT system offers many services that assist businesses and individuals to complete seamlessly and undertake accurate business transactions. Among the services it offers are – business intelligence, software solutions and compliance services.
In the face of a Russian full-scale invasion of Ukraine, a number of world leaders are demanding expulsion of Russia from SWIFT.
Potentially, barring Russia’s access to the financial system would severe the country completely from the international monetary flow.
Boris Johnson, the UK Prime Minister in his Thursday address to the British Parliament sounded vocally on the high possibility of Russia’s expulsion from the transfer network.
“I know that this house will have great interest in the potential of cutting Russia out from SWIFT, and I can confirm as I’ve always said that nothing is off the table,” The British PM reaffirmed.
The European Union (EU) appears indecisive as to the adoption of SWIFT in fast-tracking an immediate pullout of Russian troops from Ukraine. A general consensus is yet to be reached by foreign ministers either for or against Russia’s expulsion from SWIFT.
The EU is heavily dependent on Russia for 40% of its supply of natural gas. Russia is not only a major exporter of oil and gas to the EU, but also of iron and steel to other parts of the world.
The interview granted reporters by Annalena Baerbock, Germany’s Foreign Minister points to the wavering position of the EU.
She told reporters: “I can understand – I feel the same way – that in these minutes, in these hours, emotions are running high and that words like ‘Swift Agreement’ sound very, very strong, but at these moments you have to… keep a cool head.”
The position of Ukraine is very clear as it demands proactive and quick measures by the West to revoke Russia from the Swift system.
President Volodymyr Zelenskyy tweeted recently: “We demand the disconnection of Russia from SWIFT, the introduction of a no-fly zone over Ukraine and other effective steps to stop the aggressor.”
The first time a Russian cut-off from SWIFT was considered came at the backdrop of Russia’s annexation of Crimea in 2014. In response, the Russian Federation developed an alternative system to SWIFT known as the System for Transfer of Financial Messages.
In the catalogue of sanctions, SWIFT poses the deepest cut to the Russian financial system and will produce a downturn effect on its economic and political system.
By all indices, SWIFT offers the last tool for negotiating an end to Russia’s invasion of Ukraine.
“This is the very last resort, SWIFT. But this is one of the options that remain on the table” Bruno Le Maire, French Economic and Financial Minister said on Friday.
Russia’s disconnection from SWIFT will prove costly for its economy as was the case with the Iranian economy when the Islamic Republic of Iran was banned in 2012.
The Middle Eastern state lost almost half of its export revenue and witnessed a decline in its foreign trade.
Russian cut-off will be of devastating effect to Moscow, the European Union and the rest of the world.
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