Boris Johnson is pushing for governments to stop Russian banks from using SWIFT, an international messaging system critical to money transfers.
The prime minister reiterated on Friday that the measure was a significant measure against Vladimir Putin as Russian tanks approached Kiev.
What is Swift?
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. Established in 1973, it is an important part of plumbing that facilitates the flow of money around the world.
It is a secure messaging system that allows approximately 11,000 financial institutions to talk to each other and authorize payments. When a payment is sent from one bank to another, they receive a message via SWIFT before transacting. Around 40 million transactions are done using SWIFT each day.
It is operated as a co-operative by 2,000 member banks and is based in Belgium. Central banks, including the Bank of England, oversee the operation of the cooperative.
SWIFT is a neutral organization that cannot issue its own sanctions. The decision to bar Russian banks from using the system would require consent by governments.
Will the SWIFT ban hurt Russia?
Boris Johnson has made the case that pulling Russia out of SWIFT would make life difficult for Mr Putin by preventing Russia from sending and receiving payments.
Speaking on BBC Radio 4’s Today programme, Defense Secretary Ben Wallace Wallace explained: “When you pay Russia for its gas, it probably goes through the SWIFT system, for example.
He added: “We want it to be closed. Other countries don’t. We only have so many options. We’re going to work all day to get it (closed for Russia).”
Is Swift Ban Round?
VTB, the owner of VTB, a large Russian bank, said recently that it can use other channels for payments, such as phone, messaging app or email.
China has its own system known as Cips, which it hopes will become a widely used alternative to Swift.
There are also alternatives such as cryptocurrencies, and Russian banks will still be able to make payments through countries that have not imposed sanctions.
Why was the ban not implemented already?
Any boycott of Russian banks from SWIFT would require an international agreement and there are differing views on how to proceed with it.
Germany is opposing the ban and French Finance Minister Bruno Le Maire has said the measure will only be used as a last resort.
US President Joe Biden is also hesitant. Washington believes that European nations doing business with Russia could also suffer if Russian banks are barred from using SWIFT.
Russia is a major supplier of oil, gas and many other important commodities to Europe. Withholding payments could disrupt those supplies and drive up prices further.
Such a measure has already been agreed upon. In 2012, the European Union barred SWIFT from serving sanctioned Iranian firms and individuals in connection with Tehran’s nuclear program.
UK Defense Secretary Ben Wallace said: “Like many things, these are international organisations, and if not every country wants them to be taken out of the SWIFT system, it becomes difficult.”
