The leaders of the European Union adopted this Thursday their toughest sanctions to date against Russia for the invasion of Ukraine. Despite this, they were slow to approve disconnecting the country presided over by Vladimir Putin from Swift international payment platform to Saturday . Not all member states agreed to use the entire arsenal at once due to the consequences for Europe and there are capitals like Berlin in favor of keeping some ammunition in the chamber in case it is necessary to approve new sanctions packages. “The consequences of cutting Russia off the Swift need to be assessed,” argued Dutchman Mark Rutte. But what is this payment platform and why is it so important?
The Society for Global Interbank and Financial Communications (Swift, for its acronym in English) was created in 1973 by 293 banks from 15 countries with the aim of developing a computer platform that would make payments between financial institutions in different countries faster and more secure. by standardizing communication between them. In 1977, it launched its first inter-bank messaging service, which quickly replaced the technology in use up to that time, the Telex (a telegraph data transmission device). More than 11,000 banking and securities entities, market infrastructures and corporate clients in more than 200 countries and territories (basically all of the world) are currently connected to its platform.
How is it organized and controlled?
Swift is cooperatively owned by the very banks and securities firms that use it. Its headquarters are located in La Hulpe, near Brussels. Its supervision corresponds to the central banks of the G-10 (Germany, Belgium, Canada, France, Italy, Japan, the Netherlands, the United Kingdom, the United States, Sweden and Switzerland) and the European Central Bank (ECB), and it is led by the Central Bank of Belgium. In 2012, the Swift Oversight Forum was created so that information on its supervision reached a larger number of central banks (Australia, China, Hong Kong, India, Korea, Russia, Saudi Arabia, Singapore, South Africa and Turkey). Shareholders appoint a board of 25 directors of different nationalities, currently chaired by Yawar Shah of the US bank Citi. Also part of it is Eddie Astanin, president of Russia’s central counterparty entity, as well as José Luis Calderón, from Santander. The first executive of the firm as CEO is the also Spanish Javier Pérez-Tasso.
How many transactions are made through your platform?
Traffic through Swift’s network grew by 11.2% last year, reaching a daily average of 42 million payments and securities transactions. In addition, it marked a new historical maximum of 50.2 million operations on November 30, which, to put it in perspective, represents an increase of 66% compared to the daily maximum of five years earlier. According to the firm, around half of these payments are credited in less than five minutes and two thirds in less than half an hour. 44% of transactions originated in Europe, the Middle East and Africa, 41.8% in America and the United Kingdom, and 6% in Asia and Oceania.
What is the situation of Swift in Ukraine and Russia?
The Swift website in Ukraine explains that all international transfers are blocked in the country due to the Russian invasion. “The denial by the Russian Federation of the existence of the Ukrainian state and the attempt to physically eliminate the Ukrainian people should meet with a harsh reaction from the international community. The Ukrainian Association of Swift Members and User Groups, UkrSWIFT, requests support to eliminate the Russian Federation and Belarus as countries of the Swift network”, they claim. The Swift website in Russia It does not refer to the conflict, but it does give an idea of the impact that the country’s departure from the platform could have. According to the information it offers, some 300 financial entities in the country are users of it, more than half of those that operate in Russia and responsible for more than 80% of the transactions. Russia, he adds, is the second country with the most Swift users only behind the United States.
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Have other countries already been expelled from Swift?
In 2012, the European Union ordered Swift and similar smaller platforms stop providing service to a number of Iranian banks that had been sanctioned for the country’s nuclear program. “Unplugging the banks is an extraordinary and unprecedented step for Swift,” he explained at the time. Measures were in force until January 2016, when they were lifted after the agreement reached by Iran, China, France, Russia, the United Kingdom, the United States, Germany and the European Union. In 2014, the firm came under pressure to pull the plug on other countries. “Swift and its stakeholders (‘stakeholders’) have received calls to disconnect institutions and entire countries from their network, most recently Israel and Russia,” he explained in a release.
“Swift’s services are designed to facilitate compliance with sanctions and other regulations by its clients. However, Swift will not make unilateral decisions to disconnect institutions from its network as a result of political pressure. Swift regrets the pressure, as well as the media speculation surrounding it, which risks undermining the systemic nature of the services Swift provides to its clients around the world As a systemic global utility, it has no authority to make sanctions decisions. The decision to impose sanctions on individual countries or entities rests solely with the competent government bodies and the corresponding legislators,” he argued at the time.
Why is the EU reluctant to get Russia out of Swift?
Among the big countries in the world, only the United Kingdom has so far been in favor of supporting the Ukrainian request to get Russia out of Swift. Others such as the United States, Germany, Italy or the Netherlands have ruled it out for the time being. “It is the last option, but it is an option that is on the table,” the French Minister of Finance, Bruno Le Maire, has summed up. The problem is that the measure would have a devastating effect on the Russian economy, but it would also significantly affect those of other countries, particularly European ones, since it would make exchanges more difficult for banks and companies doing business in Russia. The measure was already on the table in 2014 at the request of the United Kingdom and the European Parliament following the Russian invasion of Crimea. A Carnegie Moscow Center article last May, he recalled that the then Russian finance minister calculated that the initiative could cause his country’s GDP to fall by 5%. As a result, Russia developed its own payment platform (SPFS) and it has also been suggested that, if Swift is banned, it could try to take advantage of the one launched by China in 2015 (CIPS), although it is doubtful that it would work to offset the penalty as both are much smaller.