Yahoo News What is the Swift payment system the UK wants Russia thrown out from?
UK prime minister Boris Johnson is pushing for Russia to be removed from the Swift international payment system after president Vladimir Putin invaded Ukraine on Thursday.
The potential move comes as possible sanctions against Moscow, and would come as a heavy blow to Russia if carried through, affecting its ability to trade beyond its borders.
Despite warnings against the move from German chancellor Olaf Scholz, British officials have said the PM is “very keen”, and “pushing it very hard”.
EU leaders are set to meet on Thursday evening in Brussels to discuss the bloc’s sanctions package.
Read more: What Ukraine invasion means for consumer prices in the UK
What is Swift?
The Society for Worldwide Interbank Financial Telecommunication, legally known as Swift, is a Belgian co-operative, serving as an intermediary between banks worldwide, and facilitating trillions of dollars worth of transactions.
It is used by more than 11,000 banks and financial institutions spread across more than 200 countries, and handles some 42 million messages each day.
Launched in 1977 by a coalition of banks and headquartered in Belgium, Swift is overseen by central banks in the United States, Japan and Europe.
The vast majority of Swift transactions are settled in US dollars, which helps solidify greenback’s status as the global reserve currency.
Watch: European banks brace for impact of Ukraine crisis
How will this affect Russia?
Although Russia only accounted for 1.5% of Swift transactions last year, if they were to be thrown out of the system, its largest banks would be affected, as well as its ability to trade outside of the country.
Lenders would still be able to carry out cross-border transactions, however, they would be more time-consuming and more expensive to do so. Countries cut off from swift, such as Iran and North Korea, have had to resort to smuggling and bartering to sustain their economies.
Read more: How Russia's war on Ukraine is impacting stock prices
The move would also hinder Russia being able to recoup international profits from its oil and gas exports, which currently accounts for more than 40% of its revenue.
Criticisms
As well as warnings from Germany, the US have said that it was too early to consider the move, although no option was completely off the table.
However, ejecting Russia from Swift would make it tough for European creditors to get their money back from Russian banks.
Read more: Oil soars above $100 after Putin declares war on Ukraine
In addition to this, Russia, China, and the EU have also been building up an alternative payment system. There are also emergent blockchain-based alternatives.
"Urgency and consensus is of utmost priority at the moment," said an EU diplomat, adding that at this stage it meant no move on SWIFT, because doing so would have such wide-ranging consequences, also in Europe.
Another EU diplomat said: "I am not aware of an agreement (on Swift sanctions) at this point."
Swift has also previously been criticised for its inefficiency. In 2018, the Financial Times said that transfers frequently "pass through multiple banks before reaching their final destination, making them time-consuming, costly and lacking transparency on how much money will arrive at the other end".
