SWIFT ban against Russian banks

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The SWIFT ban against some Russian banks is one of several international sanctions against the Russian regime imposed by the European Union and other western countries as a result of its invasion of Ukraine, aimed at weakening the country's economy to end the invasion by hindering Russian access to the SWIFT financial transaction processing system.

Contents

Background

SWIFT is used by thousands of financial institutions in more than 200 countries, previously including Russia, and provides a secure messaging system to facilitate cross-border money transfers. [1]

According to the Russian National SWIFT Association, around 300 banks use SWIFT in Russia, with more than half of Russian credit institutions represented in SWIFT. Russia has the second highest userbase after the United States. [2]

If Russia were to be excluded from SWIFT, its interbank payment transactions will become significantly more complex, and the country's ability to trade goods and exchange currencies would be significantly reduced, making payment be only possible in cash. [3] [4]

Timeline (2022)

24 February

The Ukrainian Government asked for Russia to be banned from using SWIFT upon the beginning of the invasion. [5] Ukrainian Minister of Foreign Affairs Dmytro Kuleba said: "The world must act immediately. The future of Europe and the world is at stake." [6] He proposed immediate "destructive sanctions" against Russia, including exclusion from the SWIFT banking system, complete isolation of Russia in all formats, the provision of weapons, equipment and humanitarian aid provision. [6] Later that day, Kuleba called on Ukraine's partners to sever all diplomatic relations with Russia. [6] However, other EU member states were reluctant, both because European lenders held $30 billion in foreign banks' exposure to Russia and because Russia had developed the SPFS alternative. [7]

25 February

French Minister of Finance Bruno Le Maire urged Russia to be expelled from SWIFT for its invasion of Ukraine. Le Maire described the SWIFT ban as the last resort and "the financial nuclear weapon". [8] Germany's Chancellor Olaf Scholz, said it was refraining from excluding Russia because Russian gas accounts for a large share of energy supplies to Germany and other parts of Europe. At the same time, Scholz suggested that such a step would be possible at a later stage. [7] The idea of excluding Russia was also supported by US President Joe Biden, who said the ban was possible, although that "that's not the position that the rest of Europe wishes to take." [7]

Later that day, German Federal Minister of Finance Christian Lindner reiterated that his country did not object to such a sanction. Lindner said his country was ready to exclude Russia from SWIFT, but that the consequences for the country's economy needed to be calculated first. [9] The foreign ministers of the Baltic states requested Russia be banned from SWIFT. [10]

26 February

On 26 February 2022, Cyprus, Italy, Hungary and Germany confirmed that they would not block the Russian exclusion from SWIFT. [11] US officials and their EU counterparts initially considered the involvement of individual banks and organizations, and the entire Russian economy. [12] The United States also imposed other sanctions against Russia, targeting banking, technological and aerospace sector of Moscow. [13]

1 March

The European Union, United Kingdom, Canada, and the United States finally agreed to remove seven Russian banks from the SWIFT messaging system: [14]

EU ambassadors have decided not to impose restrictions on the country's largest bank, Sberbank, which is partly owned by Russian gas giant Gazprom. [15] Gazprombank was also not sanctioned. [15]

31 May

The EU removed Sberbank from SWIFT as part of the 6th package of sanctions. [16]

21 Nov 2024

Washington imposed new sanctions on Russia's Gazprombank that prevent the state-controlled lender from handling any new energy-related transactions that touch the U.S. financial system. The U.S. also targeted around 50 other Russian banks and the Bank of Russia's System for Transfer of Financial Messages (SPFS). Hungary and Slovakia, both of which have long-term contracts with Russian energy giant Gazprom, are studying the changes. Russian Deputy Energy Minister Pavel Sorokin declined to comment when asked if Gazprombank would continue receiving payments from European clients.

"EU payments for energy resources through Gazprombank will likely become impossible at the end of 2024," Sinara Investment Bank analysts said.


See also

Related Research Articles

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The Society for Worldwide Interbank Financial Telecommunication (Swift), legally S.W.I.F.T. SC, is a cooperative established in 1973 in Belgium and owned by the banks and other member firms that use its service. SWIFT provides the main messaging network through which international payments are initiated. It also sells software and services to financial institutions, mostly for use on its proprietary "SWIFTNet", and assigns ISO 9362 Business Identifier Codes (BICs), popularly known as "Swift codes".

<span class="mw-page-title-main">Gazprom</span> Russian oil and gas company

PJSC Gazprom is a Russian majority state-owned multinational energy corporation headquartered in the Lakhta Center in Saint Petersburg. The Gazprom name is a contraction of the Russian words gazovaya promyshlennost. In January 2022, Gazprom displaced Sberbank from the first place in the list of the largest company in Russia by market capitalization. In 2022, the company's revenue amounted to 8 trillion rubles.

<span class="mw-page-title-main">Sberbank</span> Russian bank

PJSC Sberbank is a Russian majority state-owned banking and financial services company headquartered in Moscow. As the Russian successor entity of the State Labor Savings Banks System of the USSR, it was called Sberbank of Russia until 2015, and in 2020 further shortened its brand to Sber. Following the termination of its operations in the European Union in the immediate aftermath of the Russian invasion of Ukraine, its international footprint is primarily in the Commonwealth of Independent States.

Sberbank CIB is a multinational investment banking and asset management firm headquartered in Moscow, Russia, and a subsidiary of Sberbank. It was founded in Moscow in 1991, and was formerly known as Troika Dialog.

<span class="mw-page-title-main">Gazprombank</span> Russian bank

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<span class="mw-page-title-main">VEB.RF</span> Russian investment corporation

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<span class="mw-page-title-main">Economic impact of the Russian invasion of Ukraine</span> Financial crisis beginning after the invasion of Ukraine and subsequent sanctions

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After the Russian invasion of Ukraine, China stated that it respects Ukraine's sovereignty but Russia's concerns about enlargement of NATO should also be addressed. It abstained from United Nations votes that condemned the invasion. The Chinese government has attempted to mediate between the two countries, but its proposals have faced criticism. Although China objected to international sanctions against Russia, Chinese companies have largely complied with them. Drones made by Chinese manufacturers are used by both sides in the conflict. Exports of dual-use technology and component parts from China to Russia have drawn sanctions from the U.S. and condemnation from NATO and the European Union. Chinese state media outlets and netizens often gave more weight to Russian state views, sometimes reposting disinformation.

<span class="mw-page-title-main">United States and the Russian invasion of Ukraine</span>

The United States has supported Ukraine during the ongoing Russian invasion of Ukraine. After it began on 24 February 2022, President Joe Biden condemned the invasion, provided military, financial and humanitarian aid to Ukraine, and imposed sanctions against Russia and Belarus.

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<span class="mw-page-title-main">2022–2023 Russia–European Union gas dispute</span> Fossil fuel financing-related conflicts

The Russia–EU gas dispute flared up in March 2022 following the invasion of Ukraine on 24 February 2022. Russia and the major EU countries clashed over the issue of payment for natural gas pipelined to Europe by Russia's Gazprom, amidst sanctions on Russia that were expanded in response to Russia's 2022 invasion of Ukraine. In June, Gazprom claimed it was obliged to cut the flow of gas to Germany by more than half, as a result of such sanctions that prevented the Russian company from receiving its turbine component from Canada. On 26 September 2022, three of the four pipes of the Nord Stream 1 and 2 gas pipelines were sabotaged. This resulted in a record release of 115,000 tonnes of methane (CH4) – an equivalent of 15 million tonnes of carbon dioxide (CO2) – and is believed to have made a contribution to global warming.

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Events from 2022 in the European Union.

References

  1. ↑ "How expelling Russia from SWIFT could impact the country. And why there's reluctance to do so | CBC News". 2022-02-26. Archived from the original on 2022-02-26. Retrieved 2022-07-28.
  2. ↑ Gollom, Mark (Feb 26, 2022). "How expelling Russia from SWIFT could impact the country. And why there's reluctance to do so". CBC News. Archived from the original on April 8, 2022. Retrieved April 13, 2022.
  3. ↑ "Що таке SWIFT і що буває, коли його немає". www.ukrinform.ua (in Ukrainian). 14 November 2018. Archived from the original on 2021-04-11. Retrieved 2022-04-13.
  4. ↑ "Росію відключать від SWIFT: вже розпочали технічну підготовку | Громадське телебачення". hromadske.ua (in Ukrainian). 26 February 2022. Archived from the original on 2022-04-08. Retrieved 2022-04-13.
  5. ↑ "Here's What the New, Tightened SWIFT Sanctions on Russian Banks Actually Do". Time. Archived from the original on 2022-04-12. Retrieved 2022-04-13.
  6. 1 2 3 AFP (24 February 2022). "Russia faces 'unprecedented isolation' over Ukraine invasion, EU says". TheJournal.ie. Archived from the original on 2022-02-24. Retrieved 2022-04-13.
  7. 1 2 3 "U.S., EU unlikely to cut Russia off SWIFT for now -Biden". MSN. Archived from the original on 2022-02-24. Retrieved 2022-04-13.
  8. ↑ "How Significant Is Russia's Partial Ban from SWIFT?". The New Yorker. 2022-03-08. Archived from the original on 2022-04-05. Retrieved 2022-04-13.
  9. ↑ "Germany open to cutting Russia off SWIFT but must weigh consequences - fin min". Financial Post. 2022-02-25. Archived from the original on 2022-02-25. Retrieved 2022-04-13.
  10. ↑ "A China-Russia SWIFT Alternative Will Not Undermine Iran Sanctions". The Washington Institute. Archived from the original on 2022-03-20. Retrieved 2022-04-13.
  11. ↑ Tayeb, Zahra. "Russia edges closer to being banned from SWIFT banking system as more EU countries support move". Business Insider. Archived from the original on 2022-03-21. Retrieved 2022-04-13.
  12. ↑ Walsh, Ben (2022-03-09). "The unprecedented American sanctions on Russia, explained". Vox. Archived from the original on 2022-04-11. Retrieved 2022-04-13.
  13. ↑ "U.S. Treasury Announces Unprecedented & Expansive Sanctions Against Russia, Imposing Swift and Severe Economic Costs". U.S. Department of the Treasury. Archived from the original on 2022-02-28. Retrieved 2022-04-13.
  14. ↑ "EU Cuts Seven Russian Banks From SWIFT, Bans RT And Sputnik". RadioFreeEurope/RadioLiberty. Archived from the original on 2022-04-12. Retrieved 2022-04-13.
  15. 1 2 "EU to Ban Seven Russian Banks From SWIFT, Spare Key Firms". Bloomberg.com. 2022-03-01. Archived from the original on 2022-04-10. Retrieved 2022-04-13.
  16. ↑ "EU authorized new sanctions against Russia". 31 October 2022. Retrieved 19 November 2022.
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