Nations around the world are at a loss over what to do with Russia's invasion of Ukraine.
The country can already evade U.S. sanctions using cryptocurrencies. So, what can be done to thwart it from undertaking further attacks in Ukraine?
The European Union, United Kingdom, Canada, and United States revealed on Saturday that they would be kicking some Russian banks off of SWIFT, according to Time.
What is SWIFT and will it impact the Russian nation at all?
What is SWIFT?
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. It refers to the financial-messaging infrastructure that connects the globe's banks.
It provides a secure way for banks to transmit transfer requests to each other. When money is transferred between accounts it often passes through multiple banks before landing at its intended destination.
SWIFT provides the directions that allow banks to know where the money should finally land, ensuring it does not end up in the wrong place. The system works across more than 200 countries and territories and 11,000 financial institutions.
Sanctioning Russia with SWIFT
The move to block Russian banks from using SWIFT was announced by U.S. and European nations in a joint statement that indicated the new sanctions were meant to “hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”
Clearly, SWIFT is important to banks worldwide but is it the blow to Russia that Western states hope it will be? Richard Nephew, a former senior U.S. State Department sanctions official, told the Wall Street Journal that cutting Russian banks off SWIFT altogether “would cause the Russians a lot of headaches, but I think its value has been dramatically overstated."
This is because Russia already has its own payment system with 23 foreign banks connected and could also make use of other existing transfer systems such as telex. These may be less efficient and more expensive than SWIFT but in the end, they still work.
The question then becomes: What can be done to stop Russia from its devastating attacks?
SWIFT sanctions against Iran
In 2012, Iran's banking system was also detained from SWIFT following an EU Council decision. The advocacy group United Against Nuclear Iran (UANI) claimed that Iran's participation in SWIFT was in violation of US and EU sanctions as well as SWIFT's company standards. Later in January 2016, most Iranian banks reconnected to the network when the sanctions were lifted in accordance with the Joint Comprehensive Plan of Action (JCPOA).
In 2018, SWIFT once again suspended access to some of Iran's banks after Trump reimposed United States sanctions against Iran.