Russian banks and businesses have been freed from heavy sanctions after Russia invaded Ukraine. President Vladimir Putin himself has also been freed from sanctions.
It’s been called the “nuclear option,” but they haven’t done it yet. They haven’t banned Russia from using SWIFT, which is what’s called that.
SWIFT is a bank.
Belgium’s Society for Worldwide Interbank Financial Telecommunications (SWIFT) runs a messaging service that connects more than 11,000 financial institutions around the world. When you think about it, think of it as “Gmail for banking.”
Every country except North Korea uses SWIFT to move trillions of dollars worth of money across borders, but North Korea doesn’t use it at all. If you sell energy or other goods, Russia is a big user of SWIFT. It is sixth in the world for the number of payment messages sent on SWIFT. So if Russia were cut off from SWIFT, “the country would be cut off from much of the global financial system,” the New York Times said.
The problem is, not everyone is ready for that.
During this time, the UK and Ukraine are trying to get Russia out of a global group chat. The US and some EU countries are a little more wary. Why? Because:
127 Hours isn’t ready for them to go all James Franco on them. They still use Russian energy to keep the lights on, so shutting down Russia’s Gmail account would force financial communications onto a platform like AOL from the 1990s, which would be a huge pain for everyone.
A second thing that worries the US is how blocking Russia from SWIFT would affect the strength of the US dollar in the long run. The US gets a lot of benefits from the fact that the dollar is the world’s reserve currency, and US officials are worried that kicking Russia out of SWIFT would encourage Moscow and Beijing to work together on new payment systems (like the blockchain) that would hurt the dollar.
Some sanctions experts say that blocking access to SWIFT isn’t the best way to punish Russia because there are already ways around it. You could do it, but you might end up making more problems for yourself.
Looking at the next few years…
While a decision isn’t likely to be made soon, at least one of the people who were against a ban may be warming up to it. It was yesterday when Germany’s finance minister said, “We are open, but you have to know what you are doing.”