Nations in the West are pushing for the “financial nuclear option” of banning Russia from SWIFT over the invasion of Ukraine.
According to Lithuania’s prime minister, Western partners are inching closer to ejecting Russia from the SWIFT global interbank payments system.
“Our goal is that the decision is taken as early as possible,” Lithuanian Prime Minister Ingrida Simonyte told a news conference on Saturday in Vilnius.
“I cannot give a particular date. From what I’m hearing it seems that there is no strong opposition left.”
Spurred to action by Russia’s large-scale invasion of Ukraine, Western leaders have pressed ahead with a raft of tough sanctions this week, including targeting Russian banks and restricting the country’s ability to raise capital in international markets.
But they’ve been divided over cutting off Russia’s access to SWIFT.
SWIFT is a secure messaging system that banks use to settle cross-border payments and that serves as a key mechanism for financing international trade.
A SWIFT ban would make it harder for Russian companies to get paid for goods they export to other countries and they’d find it more difficult to invest overseas or borrow from foreign lenders.
Yet removing Russia from SWIFT would also make it harder for foreign buyers of Russian oil and gas to settle transactions, with implications for energy security and prices.
There are also concerns that the move could boost the adoption of rival interbank messaging systems, including one from China.
Ejecting Russia from the platform would also make it harder to support civil rights groups in Russia from abroad, or for Russian students abroad to send money back home to help their grandmothers, according to Annalena Baerbock, foreign minister of Germany, one of the countries lukewarm on the idea of giving Russia the SWIFT boot.
“The sword that looks hardest isn’t always the cleverest one,” Baerbock told ARD public television.
“It’s not just oligarchs who do financial transactions. …
“The sharper sword at the moment is listing banks.
“Government bonds can’t be sold abroad anymore.”
Italy, whose banks have close ties to Russian markets, has also been reluctant to exclude Russia from SWIFT.
But on Friday it moved closer to where the bulk of the EU consensus is on the issue, vowing not to veto proposals for a ban and pledging to work in unison with its EU partners.
Germany, which has the biggest trade flows with Russia of any European country, has also moved closer to backing a Moscow SWIFT ban, but must calculate the consequences for its economy, Finance Minister Christian Lindner said on Friday.
Canada and Britain both strongly back the Russia SWIFT exclusion, while Democrat President Joe Biden has said it remains on the table as an option of last resort.
“It is always an option,” Biden said of the ban.
“But right now, that’s not the position that the rest of Europe wishes to take,” Biden added, acknowledging the reservations of European allies, who depend on Russia for much of their energy needs.
French Finance Minister Bruno Le Maire on Friday called SWIFT a “financial nuclear weapon” and said its use should be reserved for extreme scenarios.
“It stops any payments from Russia or to Russia,” he said.
“When you have a nuclear financial weapon in your hands, you think before using it.
“Some member states expressed reservations, and we are taking those reservations into account.”
There’s also some opposition on Wall Street, with Bloomberg reporting on fears that a SWIFT boot could backfire, pushing Russia closer to China, accelerating the development of alternative platforms that could undermine the U.S. dollar, and send inflation higher.
Calls to remove Russia from SWIFT aren’t new, with a push by some Western leaders to consider the move when Russia took over Crimea in 2014.
In 2019, Russia’s then prime minister Dmitry Medvedev said excluding Russia from SWIFT would amount to a major escalation, equivalent politically to a “declaration of war.”
At the same time, Medvedev sought to downplay the financial impact of a ban, saying in late January that the Russian central bank has an alternative to SWIFT that is “constantly being tested, and it works.”
“It will not have a single minute of downtime and will perform all the necessary functions within the country,” said Medvedev, who currently serves as deputy chairman of Russia’s Security Council, according to the Russian state-controlled news agency Tass.
Addressing the issue of transfers from abroad, Medvedev said, “they will be more difficult, it is obvious, but it won’t be a catastrophe.”