EU, US and their allies have agreed to cut off a number of Russian banks from the main international payment system, Swift.
In the coming days this will include removing “selected Russian banks from the Swift messaging system”.
Russia is particularly reliant on the Swift system for its oil and gas exports, which its economy is highly dependent on.
However, the move could also do harm to Western businesses, who do business with Russia.
The Belgian messaging service, formally known as the Society for Worldwide Interbank Financial Telecommunications, connects more than 11,000 financial institutions around the world. It is viewed as a potential nuclear option in the world of sanctions because, if Russia was kicked off SWIFT, the nation would essentially be severed from much of the global financial system.
But doing so would not be simple and could come with its own set of costly complications for countries outside Russia, many of which are dependent on the country for energy, wheat and other commodities. That has made some nations skittish about pulling the trigger.
SWIFT is a global cooperative of financial institutions that began in 1973 when 239 banks from 15 countries got together to figure out how to best handle cross-border payments. It does not actually hold or transfer funds, but it allows banks and other financial companies to alert one another of transactions that are about to take place.
