The White House announced Saturday that the United States and allies agreed to block select Russian banks from SWIFT, the global financial messaging system.
In a joint statement with leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada, the officials said Russia being excluded from SWIFT ensures “that these banks are disconnected from the international financial system and harm their ability to operate globally.”
The announcement comes after President Joe Biden on Thursday told reporters that the penalties from the latest round of sanctions against Russia are “maybe more consequence than SWIFT.”
What does it mean for Russia to be kicked out of the SWIFT banking system? Here’s what you need to know:
What is the SWIFT financial system?
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is a global messaging system connecting thousands of financial institutions around the world.
SWIFT was formed in 1973, and it is headquartered in Belgium. It is overseen by the National Bank of Belgium, in addition to the U.S. Federal Reserve System, the European Central Bank and others. It connects more than 11,000 financial institutions in more than 200 countries and territories worldwide so banks can be informed about transactions.
Alexandra Vacroux, executive director of the Davis Center for Russian and Eurasian Studies at Harvard University, told NPR, "It doesn't move the money, but it moves the information about the money."
SWIFT said it recorded 42 million messages a day on average in 2021 and 82 million messages overall this month. That includes currency exchanges, trades and more.
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How would a removal from SWIFT affect Russia?
Barring Russia from SWIFT would damage the country’s economy right away and, in the long term, cut Russia off from a swath of international financial transactions. That includes international profits from oil and gas production, which make up more than 40% of Russia’s revenue.
Iran lost access to SWIFT in 2012 as part of sanctions over its nuclear program, though many of the country's banks were reconnected to the system in 2016. Vacroux told NPR that when Iran was kicked off, "they lost half of their oil export revenues and 30% of their foreign trade."
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What have other leaders said about removing Russia from SWIFT?
Ukrainian President Volodymyr Zelenskyy urged the U.S. and other countries to cut Russia from the system. Some nations resisted the move out of concerns for the broader economy, but as the invasion wore on more European Union nations got on board.
Early Saturday morning, Italian Prime Minister Mario Draghi told Zelenskyy that Italy supported "Russia's disconnection from SWIFT, the provision of defense assistance."
Several hours later, Germany, which had been the last European Union nation holding out on the sanctions, offered measured support for Russia's disconnection from SWIFT, according to a joint statement from German Foreign Minister Annalena Baerbock and German Economics Minister Robert Habeck.
“We are working flat out on how to limit the collateral damage of a disconnection from #SWIFT, so that it hits the right people,” the officials wrote in a statement. "What we need is a targeted and functional restriction of SWIFT.”
Contributing: The Associated Press
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