Western Nations on Saturday agreed to remove Russia from SWIFT, a crucial global banking and payments system in a debilitating blow to its economic and financial system.
The move comes a day after Russian forces failed to overtake the Ukrainian capital Kyiv despite huge aerial and artillery bombardment.
In a coordinated move, western nations led by Britain, the US, Canada, and the European Union have agreed to exclude selected Russian banks from the Swift global payments system.
Referred to as a financial nuclear option, the move is intended to prevent the Russian Central Bank from deploying its international reserves “in ways that undermine the impact of our sanctions”.
A British minister described the removal of Russia from the Swift Payment as the “ultimate economic sanction” sufficient to give a debilitating blow to the Russian economy.
What is SWIFT Payments System?
Society for Worldwide Interbank Financial Telecommunication or SWIFT is an international payment system based in Belgium that facilitates the execution of financial transactions and payments between banks worldwide.
SWIFT is a global provider of secure financial messaging services and serves as a primary messaging network through which international payments are initiated.
As of 2018, over half of all high-value cross-border payments across the world used the SWIFT network.
How it would impact Russia?
Experts believe that cutting off Russia from the Swift global payment system would effectively freeze its international banking transactions and businesses.
According to Dan Sales, Russia’s economy would be badly damaged by the act and it would be felt immediately as it would negatively impact their profits from oil and gas production, which accounts for nearly half of the country’s income.
“It means Russia will struggle to receive payments from outside of the country, which will cause serious economic problems,” says Dan.