Feb 26, 2022 - Economy & Business
Axios Explains: Ukraine

Why SWIFT matters to Russia

Illustration: Shoshana Gordon/Axios

Everyone following the war in Ukraine seems to be talking about SWIFT — but many Americans are hearing about it for the first time this week.

The big picture: SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a secure messaging service that more than 11,000 banks and other financial institutions around the world use to communicate.

  • "[E]ssentially, the Gmail of global banking," as Bloomberg explained yesterday.
  • SWIFT has become a hotly debated topic in the conversation about Russian sanctions. Cutting Russian banks' access would further isolate the country from the global financial community, and put more economic pressure on the Kremlin.
  • The U.S. and its European counterparts have so far held back from cutting off SWIFT in sanctions announced this week, but it's not off the table.

State of play: In his comments Thursday, Biden left open the possibility. And as of Friday, the EU was still discussing whether to cut Russia off, according to reports. U.K. Prime Minister Boris Johnson has come out in favor of the move.

How it works: In use since 1977, bankers use SWIFT to confirm orders, payments and trades, among other things. European countries use it to pay Russian companies for oil and gas. Regular folks overseas are also familiar with the system, using it to conduct cross-country money transfers — to pay bills, say, or send someone money.

  • Dmytro Kuleba, Ukraine's foreign affairs minister, tweeted Friday: “To some European leaders who are still hesitant: each year at commemorative events you say ‘Never again’. The time to prove it is now. Russia is waging a horrific war of aggression in Europe. Here is your ‘never again’ test: BAN RUSSIA FROM SWIFT and kick it out of everywhere.”
  • Kuleba also shared that he'd spoken further about the possibility of SWIFT sanctions with his counterparts in the U.S. and Italy.

The holdup is: Blocking SWIFT in Russia could actually hurt some European countries, particularly Germany and Italy. Without SWIFT, it would be harder for these countries to buy much-needed Russian oil and gas.

Where it stands: Sanctions experts said the sanctions announced Thursday against big Russian banks are just as effective as cutting off SWIFT — but will do less damage to Europe.

  • "Congress and the media are obsessed with SWIFT for reasons a lot of sanctions experts don’t fully understand," said Chris Miller, director of the Eurasia program at the Foreign Policy Research Institute. Instead, he says, the focus should be on how strict banking sanctions are — and will become.
  • Meanwhile, others argue that cutting Russia out of SWIFT will just thrust it into the arms of alternative messaging services.
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