President Biden on Thursday announced a new round of sanctions against Russia after its invasion of Ukraine hours earlier.
Biden said penalties against the country will include a “squeeze” on Russian access to technology and financial markets, sanctions against a list of “Russian elites,” limits on some exports and more.
But one move the president didn’t announce on Thursday was kicking Russia out of the SWIFT financial system, telling reporters that the penalties proposed are of “maybe more consequence than SWIFT.”
Why would Russia 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, NBC News reported. It connects over 11,000 financial institutions in more than 200 countries and territories worldwide, telling banks about transactions.
Alexandra Vacroux, executive director of the Davis Center for Russian and Eurasian Studies at Harvard University, previously 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. That includes currency exchanges, trades and more, Bloomberg reported.
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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, 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 has urged the U.S. and other countries to cut Russia from the system.
Dmytro Kuleba, Ukraine’s minister of foreign affairs, on Thursday tweeted, “Everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too.”
However, Biden on Thursday told reporters that the move is “always an option,” but he added that “right now that’s not the position the rest of Europe wishes to take.”
German Chancellor Olaf Scholz also told reporters that cutting Russia off from the system should not be part of the second European Union sanctions package against Russia, according to multiple reports.
Contributing: Associated Press