Pressure builds for Russia to be tossed from Swift

The Biden administration is holding firm against global pressure for the U.S. and Europe to immediately cut Russia off from the world's largest financial messaging network, arguing that the sanctions it imposed Thursday will more thoroughly punish Vladimir Putin for invading Ukraine.

Russia has been hit with sanctions that target banks, energy trading and technology. But these actions thus far have not involved disconnecting Russia from the Society for Worldwide Interbank Financial Telecommunications (Swift), a Brussels-based organization that supports messaging for cross-border transactions.

Banning Russia from Swift has become a major focus in the media, as it is positioned as isolating Russia from the international payments market.

U.K. Prime Minister Boris Johnson on Thursday called for a Russian Swift ban while announcing a package of sanctions against Russian banks and about 100 Russian individuals with ties to Russian President Vladimir Putin. And Czech President Milos Zemen, who has taken a favorable position toward Putin in the past, called for Russia to be cut from Swift, according to Reuters. In the U.S., Sen. Marsha Blackburn, R-Tenn., has called for Russia to be cut off from Swift.

"I do think the scale of the Russian invasion, and the shock it's occasioned, will make a Swift ban and easier sell," said Robert Hockett, a law professor at Cornell University. "And while Russia has workarounds for Swift, both the symbolism and reality of a Swift ban would certainly be felt, particularly as many other sanctions targeting Russian banking and other financial services will complement the Swift ban."

Cutting Russia from Swift would require collaboration between the U.S., regulators in individual European countries and for the European Union as a whole. The EU Parliament in April 2021 passed a resolution calling for a Swift ban if Russia were to invade Ukraine. There were also calls to ban Russia from Swift in 2014 following its movement of troops into Crimea. Russia was not banned, though the U.S. issued sanctions against Russian banks that led Visa and Mastercard to halt their activities in Crimea.

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"Russia’s invasion of Ukraine makes it more likely the West will muster the collective will to cut Russia off from Swift, on top of other economic sanctions," said Eric Grover, a principal at Intrepid Ventures in Minden Nevada, though he said it's still a heavy lift given German reliance on Russian energy and concerns that it would encourage others to use alternative cross-border payment systems through blockchains or cryptocurrency.

Closer to Russia, Paysera, a Baltic payment app, on Thursday halted transfers in and out of Russia in response to the invasion, and called on other payment companies to do the same.

Under questioning from reporters on Thursday, President Biden suggested the sanctions the U.S. has imposed on Russian banks that hold more than $1 trillion in assets are tougher than an action involving Swift.

"Right now" a Swift ban "is not the position that the rest of Europe wishes to take," Biden said. "The sanctions we've imposed exceed Swift. The sanctions we imposed exceed anything that's ever been done."

While some European Union members have reportedly been reluctant to support a Swift ban over fears it would disrupt energy payments, the severity of the invasion could generate support for a ban.

Swift serves more than 11,000 financial institutions in more than 200 countries and averages about 35 million transactions per day.

Iran is the only country Swift has ever banned. The organization made the move in 2018 in response to concerns that Iranian banks were financing the country's nuclear weapons program.

A Swift ban would be unlikely to totally isolate Russia, which operates its own payment messaging organization, called System for Transfer of Financial Messages. STFM is not as large as Swift, and operates only during business hours. China also has its own messaging organization, called Cross-Border Interbank Payment System.

"Russia is overwhelmingly dependent on Swift," Grover said, adding that the alternatives don't have enough scale to be relevant.