Ground Report, New Delhi; Akhilesh Dwivedi: A ban has been imposed by Swift, A Payment Gateway on Russia in lieu of the ongoing turmoil over Ukraine. Russia’s President Putin launched Special Military Operations on Ukraine in the UNSC Emergency Meeting held on February 24, 2022. The operations have trampled the situation in a blink of an eye and Ukraine is on the verge of being crippled.
Swift refers to Society for Worldwide Interbank Financial Telecommunication, and it is the payment network for the world, that is used by financial institutions to transmit and receive information such as money transfer instructions rapidly, precisely, and confidentially.
Swift’s purpose is to create a system only to ease treasury and correspondent trade processing. Banks, brokerage firms and trading houses, depositories, corporate business houses, securities dealers, clearinghouses, asset management firms, foreign exchange and money brokers, and exchanges are now included.
Swift provides each bank or financial company an eight- or eleven-character unique code for financial transactions. The Bank Identifier Code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code are all names for the same code.
Reason Behind the Imposition:
Various western and European nations have imposed tough sanctions on Russia in response to its aggression of Ukraine, along with the exclusion of many institutions from the Swift international payment system. The United States, Germany, the United Kingdom, Europe, and Canada are among the states that have issued restrictions. For its ongoing conquest of Ukraine, Russia has been subjected to the most severe economic punishment yet. The Swift financial messaging system transmits large sums every day between more than 11,000 banking institutions across the globe.
Bringing the EU on the panel with Swift sanctions on Russia was a difficult task, given that EU commerce with Russia totaled 80 billion euros, almost ten times that of the US, which had been an early advocate of such moves.
According to a press declaration, “the measures are supposed to further isolate Russia from the international financial system.”
Impact on Russia:
Russia will be denied access to international financial markets. The restriction would make it more difficult for Russian businesses and people to pay for imports and get paid for exports in currency.
The US has already managed to convince the Belgium-based Swift system to exclude a country — Iran —because of its nuclear program. However, excluding Russia from SWIFT might harm other economies, particularly that of the United States and its significant partner Germany.
After Moscow attacked and conquered Ukraine’s Crimea and supported rebel forces in eastern Ukraine in 2014, allies on both sides of the Atlantic recognized the Swift option. Russia said at the time that excluding it from Swift would be similar to declaring war. The allies scrapped the concept at the time, after being criticized for their feeble response to Russia’s assault in 2014. Ever since, Russia has attempted but failed, to build its financial transmission system. The West’s official stated on Saturday for a partial disengagement from Swift leaves an opportunity for Europe and the US to rapidly increase the punitive measures in the future.
The Writer is a Doctoral Student of Defense & Strategic Studies from CSJMU, Kanpur. He has a keen interest in International Relations and National Security issues.