Ukraine wants Russia out of the Swift financial system; understand the impact of this

Russia's war against Ukraine has already generated a series of economic sanctions against the country presided over by Vladimir Putin. Ukraine's Foreign Minister Dmytro Kuleba has called for another to be banned from the Swift, the world's leading international transfer system.

Swift is an acronym for the World Interbank Financial Telecommunications Society. It is an international cooperative established in Brussels in 1973 and supported by 239 banks in 15 countries. Today it has more than 111,000 financial institutions from more than 200 countries, including Russia. Its goal is to be a channel of communication and standardization of financial transactions, thus streamlining the global economy.

System messages are considered secure because they maintain guarantees based primarily on the high redundancy of hardware, software, and people. That is, for a message to reach its receiver, you need to go through a series of confirmation protocols. The system operates on closed networks only with people authorized to use it, in addition to being encrypted. By 2020, about 38 million Swift "FIN messages" were sent daily by the platform.

Why does Ukraine want Russia out of Swift during the war?

Russia's ban on Swift was already being discussed by countries allied to Ukraine even before the Russian invasion. The idea is to prevent Russian banks from having access to any money from abroad and thereby weaken the economic power of the warring nation. In addition, the country would be left out of the largest financial markets and it will be more difficult for Russian companies and individuals to pay for imports and exports, loans, or investments abroad.

Russian banks can use other channels for payments, such as phones, messaging apps, or email. Thus, Russian banks would be able to conduct some transactions with countries that did not impose sanctions, but as they are less efficient and safe means, this would impact on costs and volume of operations, generating late payments or business exemptions.

On the other hand, this would not be bad just for Russia. Companies and governments with business with the country would have more difficulties in realizing the sale and purchase of products, as they would have to appeal to the alternatives mentioned above. On Thursday (24), the President of the United States, Joe Biden, told reporters that taking Russia out of Swift is a sanction option, but reiterated that countries linked to the system have not yet made that option so far.

https://www.lktechsky.com/2022/02/ukraine-wants-russia-out-of-swift.html