The European Union, the United States and their allies standing against Russia’s invasion of Ukraine said they have agreed to freeze more Russian assets and cut certain Russian banks off of the global payment system SWIFT.
Since its conception in the 1970s, the only two countries to have ever been kicked off of SWIFT are Iran and North Korea. Western leaders were previously in disagreement on whether or not to restrict Russia’s access to SWIFT, but officially reached a decision on the matter on Saturday Feb. 26.
In a joint statement by the EU and its allies, officials wrote, “We commit to ensuring that selected Russian banks are removed from the SWIFT messaging system. This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.”
What is SWIFT and why does it matter?
SWIFT is a Belgium-based messaging system that connects banks around the world, enabling them to make international transactions and payments.
It links approximately 11,000 banks and financial institutions in over 200 countries. It serves as the keystone in the global economy and is used for trillions of dollars in transactions.
My hotel in Moscow asked me to settle the bill early because they aren’t sure if credit cards are going to work once SWIFT sanctions kick in.— Raf Sanchez (@rafsanchez) February 26, 2022
Without access, it will harm Russia’s ability to do business outside of its borders and greatly impact the country’s economy. Ukrainian President Volodymyr Zelensky has repeatedly called for Russia to be kicked off SWIFT entirely, but global leaders were hesitant to take such a measure because of the rippling effect that would follow.
Russia supplies approximately 40% of Europe’s natural gas and banks in countries like Germany routinely use SWIFT for transactions with Russian banks. A total ban from SWIFT would not only harm Russia’s economy but other economies around the world.
To mitigate this negative global impact the EU has agreed on selective restrictions on Russia’s access to SWIFT rather than a complete and total ban.
Before restrictions could be implemented, a consensus had to be reached between the countries that oversee SWIFT. Those countries are Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, the United Kingdom, the United States, Switzerland and Sweden.
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