How Russia’s SWIFT Ban Could Backfire on West & Pave Way for Alternative Payment Systems

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All Russian banks already subjected to sanctions will be disconnected from SWIFT, European Commission President Ursula von der Leyen announced on Saturday. The EU, the UK, Canada and the US agreed to implement the measure over Russia’s “special operation” to “de-militarise and de-nazify” Ukraine. 

“The removal of Russian banks from SWIFT means that while transactions can continue to take place the means of communicating have been rendered slower,” says Suranjali Tandon, assistant professor at a Delhi-based National Institute of Public Finance and Policy. “In order to predict the impact, it is important to assess the number of banks that currently use SWIFT and the size of transactions undertaken through these.”

“He opened the third seal, I heard the third living creature say, “Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand” Rev. 6:5 

: A man using a mobile phone passes the logo of global secure financial messaging services cooperative SWIFT at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017 - Sputnik International, 1920, 27.02.2022

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a Belgium-based independent organisation that serves as an internal messaging system between over 11,000 banks and financial institutions in over 200 countries. Several major Russian banks, including Sberbank and VTB, could be disconnected from the system in the coming days.

The Western leaders have also committed “to imposing restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of our sanctions.”

Russia’s Vnesheconombank (VEB) stated that having been disconnected from SWIFT, the nation will switch to the financial messaging system (SPFS) of the Russian Central Bank and alternative channels.

“In 2014, Russia had already initiated a switch to its alternative payment system called SPFS,” says Tandon. “To the extent that these banks are used for cross border payments, the impact of the current sanctions will not have the intended impact.”

According to the Central Bank of Russia’s website, at least 331 banks, both domestic and foreign, are listed as the SPFS system users.

Russia’s withdrawal from SWIFT does not pose a threat to our internal settlements, stimulates the spread of the ruble as an international currency and at the same time reduces the possibility of destructive control by the West of our settlement operations,” Andrey Klimov, head of the Federation Council Commission for the Protection of State Sovereignty, told the press on 27 February.

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