Demonstrators hold placards protesting Russia’s massive military operation against Ukraine in Geneva, Switzerland, Saturday, February 26, 2022. A signal calls for Russia to stop SWIFT for business. (Salvatore Di Nolfi/Keystone)
PARIS – As US and European leaders pondered how far to go in approving Russia for an attack on Ukraine, their focus on Friday turned to the most divisive – and potentially most serious – weapon at their disposal. French Finance Minister Bruno Le Maire called it a “financial nuclear weapon”.
He was talking about SWIFT – short for Society for Worldwide Interbank Financial Telecommunication – a messaging network connecting banks around the world. The Belgium-based consortium connects more than 11,000 financial institutions operating in more than 200 countries and territories, acting as a key hub enabling international payments. Last year, the system sent an average of 42 million messages a day.
Should Russia’s separation from Swift become one of the first points of serious Western division in this crisis, after the European Union, a bloc of 27 nations, had demonstrated unity for weeks.
Prior to the invasion, Western nations had promised a punitive regime of sanctions that President Joe Biden said would be “sharp and severe”. In Europe, it was difficult on Friday to assess the severity or severity or determine which countries were doing more or less as punitive action is a work in progress. European Council President Charles Michel said “another package” was under “immediate preparation”.
EU foreign ministers agreed on Friday to freeze the assets of Russian President Vladimir Putin and Foreign Minister Sergei Lavrov, the first time both people have been personally targeted by such measures, but details on other measures still not clear.
Eastern European countries and France have supported separating Russia from SWIFT, which would make it more difficult for Russian entities to process transactions and could hamper the Russian economy’s ability to conduct business beyond its borders.
But the idea has faced resistance from some corners of Europe who are concerned about the repercussions on their economies. Biden said on Thursday that the Swift ban was not part of the plan, citing European hesitation.
EU foreign policy chief Josep Borrell acknowledged on Friday that the bloc’s member states have not yet reached an agreement on SWIFT. “Maybe it will be adopted in the coming days, it will depend. We are exploring all possibilities,” Borrell said.
Three European officials, discussing sensitive matters on condition of anonymity, said Italy and Germany were among the countries that have so far opposed the move. Both countries have strong trade ties with Russia, with Germany particularly dependent on Russian gas.
But as of Saturday, Italy’s government said it was ready to cut Russia. Following a call between Italian Prime Minister Mario Draghi and Ukrainian President Volodymyr Zelensky, the Italian government said it would “fully support the EU’s line on sanctions against Russia, including those within the SWIFT framework.” “
Speaking on Friday evening, Germany’s Finance Minister Christian Lindner said “we are open” to the idea of separating Russia from SWIFT. “But one has to know what someone is doing,” he warned, adding that Europe needs to question itself whether the move “could prompt Russia to stop its gas deliveries, because they The payment cannot be made now.”
“And if those gas distributions end, what will be the effect on our supply?” he said.
Russia will not be the first country to break away from the international network. Iranian financial institutions lost access to it in 2012, after the European Union imposed sanctions on the country over its nuclear program. But Iran was a far less important trading partner for EU countries than Russia.
The country gained access to Iranian banks after signing a 2015 deal to limit its nuclear activities, but again in 2018 after the Trump administration scrapped the deal and pressured SWIFT to follow suit. was cut from
Since invading Ukraine’s Crimean peninsula in 2014, Russia has drawn to the possibility that it could be cut off and some have called for such retaliation. In response, Russia launched an alternative network called the System for the Transfer of Financial Messages. But experts say this is an inadequate replacement. As of the end of 2020, the system included only 400 participants from 23 countries, according to the Russian state-owned Tass news agency.
Ukraine’s Foreign Minister Dimitro Kuleba said on Friday he had pressured Foreign Minister Antony Blinken to “use all-American influence on some hesitant European countries to ban Russia from Swift”.
Pressure also appeared to be mounting from within Europe. British Prime Minister Boris Johnson is among the biggest supporters of such a move, the Financial Times reported on Thursday. France is also becoming increasingly vocal in its support.
Standing next to his German counterpart, French Finance Minister Le Maire said early on Friday morning that cutting Russia off the global payments system would be an option of “last resort”. But by noon, he clarified that “France is not among the countries” that have “expressed reservations” about the move. He cited the diplomatic obligations of France, which presides over the Council of the European Union, as the reason for the country’s initially unclear status.
“When you have a financial nuclear weapon in your hand, you should think before using it,” he said.
On Thursday, Biden sought to portray a Swift cut-off as a limited sanctions move, saying “the sanctions we put in place exceed Swift.”
Those penalties targeted Russia’s technical and financial sectors, including barring the financial institutions of the country’s 10 largest banks from processing payments through the United States. And the Biden administration is zeroing in on Russian oligarchs as well, with Biden saying more sanctions were probably on the way. The president said the sanctions would take time to work, indicating that their impact should be assessed “in a month or so”.
But Jacob Kierkegaard, senior fellow at the Petersen Institute for International Economics, predicted that Western powers would move in a matter of days to get Russia out of SWIFT. “The domestic political pressure on these leaders is increasing rapidly, as it becomes a symbol of standing with Ukraine,” he said. “Governments cannot afford to be seen as the wrong side of history for too long.”
The economic cuddle alone has rarely succeeded in persuading rogue nations to change course, said Charlie Steele, a former chief attorney at the Treasury Department’s Office of Foreign Assets Control. “Russia is so embedded in the world economy,” he said, “we have to see how effective America’s economic power, which powers sanctions, will be and how much pain Russia can bear.”
Aries reported from Brussels.