Why Removing Russia From SWIFT Won’t Be Simple

President Joe Biden announced this week that the U.S. and Europe and other allies were stepping up their sanctions against Russia over its invasion of Ukraine.

While the president said the sanctions would inflict a severe cost on the Russian economy,” he also backed away from using what he called “the nuclear option”: cutting Russia off from SWIFT.

SWIFT, or the Society for Worldwide Interbank Financial Telecommunications, is a Belgian messaging service connecting more than 11,000 financial institutions worldwide.

Why is it the nuclear option? As The New York Times noted Friday (Feb. 25), removing Russia from the service would basically cut the country off from a bulk of the world financial system.

It would also be tough to do and could potentially backfire on countries outside of Russia, which rely on that country for energy, wheat and other commodities.

Read more: UK PM Boris Johnson Wants Russia Booted From SWIFT

Founded in 1973, SWIFT was created by a group of 239 banks from 15 countries who wanted a better way to conduct cross-border payments. SWIFT doesn’t hold or transfer funds, but lets banks and other financial institutions alert each other when transactions are taking place.

Blocking a country from SWIFT would hamstring its ability to carry out those cross-border transactions, forcing banks, importers and exporters to seek new ways to send payment instructions. But because Europe relies heavily on energy exports from Russia, leaders in the region have shown reluctance to take that step, as it would make doing business with Russia costly for them as well.

U.K. Prime Minister Boris Johnson has called for Russia to be removed from SWIFT, as have leaders in Ukraine.

“Everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too,” Dmytro Kuleba, Ukraine’s minister of foreign affairs, wrote Thursday (Feb. 24) on Twitter.

I will not be diplomatic on this. Everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too. BAN RUSSIA FROM SWIFT.

— Dmytro Kuleba (@DmytroKuleba) February 24, 2022

Biden has said it’s too early to take that step.

“The sanctions that were imposed on all their banks have equal consequences, maybe more consequences than SWIFT,” he said. “It is always an option, but right now that’s not the position that the rest of Europe wishes to take.”