The EU and the U.S. are formally signing off on sanctions against Russia in response to President Vladimir Putin’s decision to invade Ukraine, but the penalties stop short of booting Russia from the global SWIFT payments network.
Virtual meetings were held yesterday among G7 leaders and separately in the U.S. and the EU.
Russia’s removal from SWIFT would sever it from most international financial transactions, including its profit center — oil and gas production — which accounts for upwards of 40 percent of the country’s revenue, according to multiple media reports.
President Joe Biden said that, collectively, the sanctions are “more consequential” than the “nuclear option” of severing Russia from much of the global financial system, according to a White House statement.
See also: UK PM Boris Johnson Wants Russia Booted From SWIFT
The U.K. also called for Russia’s removal from SWIFT in August 2014. At that time, Russia’s former finance minister Alexei Kudrin said that such a move could trigger a 5% drop in Russia’s GDP. Former prime minister Dmitry Medvedev said at the time it would be like “a declaration of war,” according to the Carnegie Moscow Centre.
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Russia has since unsuccessfully attempted to develop its own financial transfer system, which is one of the concerns some world leaders have about kicking the country off SWIFT. To continue global trade, Russia could move forward with finalizing its own system — or it could collaborate with China on an entirely different payments network, one not based on the U.S. dollar, some G7 leaders reportedly feared.
Read more: Biden, European Leaders Double Down on Russia Sanctions
The consequences of booting Russia from SWIFT would also compromise energy exports to Europe.
SWIFT — the Society for Worldwide Interbank Financial Telecommunications — is a member-run cooperative based in Belgium that is used by an estimated 11,000 financial institutions and companies across 200 countries to facilitate cross-border payments.
The EU sanctions will sever 70% of Russia’s banking system from international financial markets and cap how much Russian elites can hold in the EU. The White House said that the combined sanctions hit all 10 of Russia’s biggest financial institutions, “including the imposition of full blocking and correspondent and payable-through account sanctions, and debt and equity restrictions, on institutions holding nearly 80% of Russian banking sector assets.”
