If the United States decided to impose sanctions on Russian banks, then it could say that Swift violated those sanctions by allowing those banks to use its system. The Ukraine Sovereignty Defense Act of 2022 that Senate Democrats unveiled this month would authorize sanctions on providers of specialized financial messaging services, such as Swift, but the Biden administration could also impose such sanctions without congressional approval. .
Cutting off a country’s access to Swift is unprecedented.
In 2012, Swift expelled up to 30 Iranian financial institutions, including its central bank, to comply with European Union sanctions that were enacted in response to Iran’s disputed nuclear power program. Services were brought back online after the 2015 nuclear deal and then cut off again in 2018 after the Trump administration withdrew from the pact and resumed sanctions.
How would Russia respond to being eliminated?
Russia has faced such threats before. In 2014, when Russia invaded and annexed Crimea, there were calls in Europe to exclude Russia from Swift. Dmitri A. Medvedev, then Russia’s prime minister, said at the time that such a move would be a “declaration of war.” According to the Carnegie Moscow Center, Russian forecasts at the time projected that Swift’s split would reduce the country’s gross domestic product by 5 percent.
Last week, Nikolay Zhuravlev, deputy chairman of the Russian Federation Council, told the state-run TASS news agency that pulling Russia out of Swift would also have economic consequences for European countries, which he said would not be able to receive Russian oil imports. gas and metals as a result of which Russia cannot receive foreign exchange.
Smith, the former Treasury official, said the United States and Europe could look at ways to exempt certain Russian sectors, such as energy, from sanctions. However, moves to cut off Russia’s economy could have unintended consequences, such as retaliation from Moscow, which could rock global markets.
“They are not without their own cards to play,” he said.
A change to Swift alternatives
The threat of being cut from Swift might not be as dire as it has been in the past.
Several countries, including Russia, have developed their own financial messaging systems that, while less sophisticated than Swift, could allow Russian financial companies to communicate with the world. Russia began developing its system in 2014 amid growing sanctions threats from the United States.
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