The European Union and the United States have decided to cut off a number of banks of Russia from the main international payment gateway called SWIFT. The assets belonging to the central bank of Russia are now expected to be frozen and will lead to constraining Moscow’s ability to access its reserves overseas.
As per the joint statement, the aim of the move is to isolate Russia further from the international financial markets. These joint sanctions are being called the harshest measures against Russia ever since the military forces have gone into Ukraine and these are expected to badly hit the country, especially considering how heavily dependent it is on the SWIFT platform for all its key natural resources trade particularly the payments for its oil and gas exports. Cutting off any nation from the SWIFT in the financial world is said to be equivalent to restricting the Internet access of a country.
Prior to this, only one nation had been cut off from SWIFT and that was Iran. It had then resulted in the loss of almost a third of its foreign trade. This move against Russia has only been implemented partially for now and has covered only a few of the Russian banks. The United States and its allies have refrained from expanding this ban to the whole country as of now.
The SWIFT system stands for the Society for Worldwide Interbank Financial Telecommunication. This is a secure platform for financial institutions for the exchange of information about international money transactions including money transfers. SWIFT is not responsible for moving money but it operates as a middleman for the verification of information of the transactions by providing secure financial messaging services to over 11,000 banks in more than 200 countries. SWIFT is based in Belgium, it is overseen by the Central Banks from 11 nations- France, Canada, Germany, Italy, the Netherlands, Japan, Sweden, Switzerland, the United Kingdoms, the United States, and Belgium.
Cutting off the Russian banks from the SWIFT platform will be hitting the country’s economy hard. As per the statement by the White House, it will make the nation rely on the telephone or fax machine for the payments. It is being reported that the Russian currency market is going to be a catastrophe. Russia has built up a cushion of foreign currency taking into account the previous round of sanctions that were imposed in 2014. The reserves touched a record high of $630 billion in January this year and will be significantly decreasing after the new measures.
As per some claims, Russia is allegedly collaborating with the Chinese on a possible venture which might be a potential challenger to the SWIFT platform. Even though the ban may take a while to make an impact, the most important thing, for now, is that there is a strong resolve from the Western powers.
