West unleashes SWIFT bans, more penalties on Russia
On Saturday the US and its allies said that it would place sanctions on Russia’s central bank and remove some Russian banks from the Society of Worldwide Interbank Financial Telecommunications (SWIFT) global payments system.
SWIFT is a messaging system that allows banks to send money to each other. It is used by more than 11,000 financial institutions in more than 200 countries.
In a joint statement, the leaders of the European Commission, France, Germany, Italy, the U.K., Canada, and the US said they would take the economic measures to “hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”
Ursula von der Leyen, president of the European Commission, said that cutting Russian banks out of the system will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports.
Excluding Russian banks from SWIFT restricts Russia’s access to financial markets across the world. Russian companies and individuals will find it harder to pay for imports and receive cash for exports, borrow or invest overseas.
The new sanctions may result in Russian banks being unable to make payments for trade and financial activities, preventing the country from exporting commodities such as oil, coal, and natural gas. It would also prevent Russia from importing key technologies such as semiconductors and machinery for its own industries.
However, the Russian banks could use other channels for payments such as phones, messaging apps, or email. That would let Russian banks make payments via banks in countries that have not imposed sanctions but since alternatives are likely to be less efficient and secure, transaction volumes could fall and costs rise.
Earlier, the West had already imposed a series of sanctions, including asset freezes and a ban of transactions with Russia’s state-owned banks. Russia has been under economic sanctions since its annexation of Crimea in 2014.
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