SWIFT Ban on Russia | Russia Ukraine War

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SWIFT Ban on Russia- Relevance for UPSC Exam

GS Paper 2: International Relations- Effect of policies and politics of developed and developing countries on India’s interests.

Recently, the US and European Union (EU) have decided to partially exercise the SWIFT mechanism by cutting off a number of Russian banks from the main international payment gateway, SWIFT.
The assets of Russia’s central bank are also expected to be frozen, constraining Moscow’s ability to access its overseas reserves.
The intention of the moves is to “further isolate Russia from the international financial system”.

About: SWIFT is a secure platform for financial institutions to exchange information about global monetary transactions such as money transfers.
- SWIFT Headquarters: SWIFT is based in Belgium.
SWIFT Acronym: The SWIFT system stands for the Society for Worldwide Interbank Financial Telecommunication.

While SWIFT does not actually move money, it operates as a middleman to verify information of transactions by providing secure financial messaging services to more than 11,000 banks in over 200 countries.
SWIFT Administration: it is overseen by the central banks from eleven industrial countries: Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States, besides Belgium.

Excluding Russian banks from the SWIFT platform is expected to hit the country’s economy hard will make the country rely on “the telephone or a fax machine” to make payments.
Excluding Russian banks from the SWIFT platform is going to be a catastrophe on the Russian currency market.
The banks affected are “all those already sanctioned by the international community, as well as other institutions
While workarounds to SWIFT have been tried, none have proven to be effective.