By the way, what is the Swift network, “the financial nuclear weapon”?

• After hesitating, the West decided to exclude many Russian banks from the Swift interbank network.

• The threat had been hovering over Russia for several days, and was presented as a “financial nuclear weapon”.

• But what exactly constitutes this blockage?

“A financial nuclear weapon”.

This is how Bruno Le Maire, the Minister of the Economy, presented at the end of last week the potential exclusion of Russia from the Swift banking network.

A threat carried out: The European Union, the United States and Canada reached a consensus on Saturday to ban certain Russian banks from accessing Swift's services very soon, in the long list of economic sanctions imposed on Moscow since the invasion of Ukraine.

Are concerned “all the Russian banks already sanctioned by the international community, as well as if necessary that other institutes”, specified the spokesman of the German government.

Or 70% of the banking network of Russia, according to the European Union.

The financial “atomic bomb” has therefore just been dropped on a country which has 9,000 warheads (real ones).

But what exactly is it? 

takes stock.

What is Swift?

Swift, by its nickname 

, is the secure bank transfer system used by 11,000 financial institutions in more than 200 countries, including Russia.

"This allows banks to make transactions in a secure and traceable way, via a computer system," explains Karl Toussaint du Wast, co-founder of Netinvestment.

In 2021, the Swift network transmitted approximately 10.6 billion payment orders worldwide.

Swift is a company under Belgian private law, but it "now operates more like an international organization", continues lawyer Olivier Dorgans, specialist in economic sanctions.

“Its governance is done by its members – the banks all over the world.

Hence the need to have a consensus between the European Union, the United States and Canada and a united voice to influence such a decision”, continues the expert.

Is cutting Swift off from Russia really a “financial nuclear weapon”?

The Russian banks concerned will no longer be able to make or receive transfers to foreign banks.

"Blocking Swift will have a catastrophic - and immediate - effect on the Russian economy, cut off from the rest of the world," said Olivier Dorgans.

Same analysis with Karl Toussaint du Wast, who tempers the metaphor with the atomic weapon: “A nuclear bomb, it shaves everything and there is no way to escape it.

There, Russia has plans B.”

Since the annexation of Crimea in 2014, when such a threat had already been brandished, Moscow has been trying to get around the problem: the country's National Bank has developed its own network, the Financial Message Transfer System (SPFS), connected to 23 foreign banks.

Russia could also use the Chinese and Indian banking networks, so as to continue some exchanges with the international.

However, this remains “alternative and second-hand solutions, recalls Olivier Dorgans.

Nothing replaces Swift and its universality.

Including Russian banks, the SPFS has 400 banking institutions, compared to nearly 12,000 for Swift.

»

Hence the admittedly imperfect comparison with the nuclear bomb: A study by the Carnegie Moscow Center estimates that a cut would have “devastating consequences, particularly in the short term”.

According to the report, if in 2014 Russia had been excluded from Swift, it would have lost 5% of its GDP.

The study also mentions the case of Iran, which had been deprived of it in 2012 and 2018, due to sanctions against its nuclear program.

"The country has lost almost half of its oil export revenue and 30% of its foreign trade," the report said.

And for the people?

Concretely, even by cutting off Swift at certain Russian banks, “the average Muscovite will still be able to withdraw his money from the ATM or go buy his baguette.

Cutting Swift from Russia is a radical option but which, at least in the short term, spares the population,” develops Karl Toussaint du Wast.

What are the consequences for Europe?

Many European countries were reluctant before adopting this solution, in particular Germany or Italy, two of the nations most dependent on Russian gas.

Because if taking Swift out of Russia cuts that country off from the rest of the world, it has the downside of… cutting off the rest of the world from that country.

According to the French Ministry of Economy, the EU is Russia's leading trading partner, representing 40.6% of its exports and 35.5% of its imports.

For the moment, the energy sectors – which represent the bulk of trade – are not affected by the exclusion of Swift, doing the business of the Europeans.

But even with this nuance, the cut is likely to have a strong impact for the Twenty-Seven.

"It will be much less destructive than for Russia, but there will be damage", analyzes Olivier Dorgans.

The specialist recalls, from his first public speech, Emmanuel Macron indicated that Europe was going to war.

Before adding, at the Agricultural Show, that the situation was set to last.

"A way to warn the French that they were going to suffer the backlash of economic sanctions against Russia", pleads the lawyer.

Inflation, rising energy prices, slowdown in growth… Purchasing power risks being one of the collateral damage.

"Europe is coming out of a period where States will have learned to be more interventionist to guarantee the economy, this idea will no doubt have to be extended", concludes Olivier Dorgans.

The “Whatever the cost” could have a bright future ahead of it.

World

War in Ukraine: Why is it almost impossible to suffocate Russia economically?

World

War in Ukraine: Many Russian banks will be excluded from the Swift platform

• War in Ukraine

• Atomic bomb

• Europe

• Bank

• Russia

• Economy

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