Russia’s Swift Invasion Met By SWIFT Expulsion
When Russia invaded Ukraine EU members, the USA and Canada all pushed for a new form of sanctions against Russia. It involves something called SWIFT.
What Is SWIFT?
SWIFT is a global financial messaging system. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication… messaging system. Since swiftms is less catchy they went with SWIFT.
SWIFT is not a bank. It is a messaging system between 11 000 financial institutions around the world and is relied upon to transfer information between these entities. Think of it as Gmail but for banks.
Each day around 42 million messages are sent via the system. There are 300 banks and financial institutions in Russia that make use of the system. Removing Russia from SWIFT was described by the French Finance Minister as the “financial nuclear option” because suddenly they cannot securely communicate and they are effectively cut off from communicating outside the country. They are also unable to get foreign currency and information in so any international sales or fund transfers can’t happen.
The Fall of The Russian Ruble
Russia has taken a knock economically from the SWIFT expulsion and the global sanctions coming in left right and centre. The Stock markets there had to be closed and the currency dropped by 30% almost overnight.
People on the streets in Russia are queing up to use ATMS to try get cash as electronic banking options face challenges and people grow nervous and want cash in hand. This is called a run on the banks. Extra cash is being sent to all ATMs to try cover the sudden panic withdrawing.
The next step in sanctions from international countries and the banking world is to target the Russian Central Bank.
This is aimed at cutting off access to the massive reserves that Russia has built up for just such international reaction during the, now obviously, long planned invasion. It is hoped that these sanctions hurt so much that Russia actually negotiate with Ukraine for some sort of settlement or ceasefire. Russia was of course expecting many sanctions but it now remains to see how much they are prepared to accept before they adjust their plans (unless these were the plans all along).