Western allies cut Russia out of SWIFT banking system amid Ukraine invasion

26 February 2022, 22:24 | Updated: 26 February 2022, 23:12

EU Commission President Ursula von der Lyon has announced the EU, UK and US have all committed to cutting off several Russian banks from the SWIFT international payment network.
EU Commission President Ursula von der Lyon has announced the EU, UK and US have all committed to cutting off several Russian banks from the SWIFT international payment network. Picture: Alamy

By Sophie Barnett

A number of Russian banks will be removed from global payments network SWIFT in a bid to "cripple Putin's ability to finance his war machine".

The President of the European Commission Ursula Von Der Lyon announced a new set of sanctions against Russia on Saturday, after a deal was struck between western allies the UK, EU and US.

She confirmed that a number of Russian banks will be removed from SWIFT, so they can't operate globally, and the assets of Russia Central Bank will also be paralysed.

Ms von der Leyen said: "As Russian forces unleash their assault on Kyiv and other Ukrainian cities, we are resolved to continue imposing massive costs on Russia that will further isolate Russia from the international financial system and our economies.

"In co-ordination with President Biden, President Macron, Chancellor Olaf Scholz and Prime Minister Draghi as well as Prime Minister Trudeau and Prime Minister Johnson, we considered a significant tightening of our international response.

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"The European Union and its partners are working to cripple Putin's ability to finance his war machine."

She said the Russian army is committing "barbaric actions" as she condemned Putin's invasion of Ukraine.

"It is bombing and launching missiles, killing innocent people," she said.

"At the same time, the entire world is witnessing the determined and brave resistance by the Ukrainian army and population."

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The move - which will hit Russian trade and make it harder for its companies to do business - has been introduced to escalate economic sanctions on Vladimir Putin’s regime after he launched what he called a "special military operation" on Thursday.

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, is the main secure messaging system that banks use to make rapid and secure cross-border payments, allowing international trade to flow smoothly.

In 2020, about 38 million transactions were sent each day over SWIFT.

The UK defence secretary, Ben Wallace, had been pushing for Russia to be banned from SWIFT, but on Friday said that it was not within Britain’s control.

Allies on both sides of the Atlantic had considered the SWIFT option in 2014, when Russia invaded and annexed Ukraine's Crimea and backed separatist forces in eastern Ukraine.

Russia declared then that kicking it out of SWIFT would be equivalent to a declaration of war.

The allies - criticised ever since for responding too weakly to Russia's 2014 aggression - shelved the idea. Russia since then has tried to develop its own financial transfer system, with limited success.

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The US has succeeded before in persuading the Belgium-based SWIFT system to kick out a country - Iran, over its nuclear programme.

But kicking Russia out of SWIFT would also hurt other economies, including those of the US and key ally Germany.

The disconnection from SWIFT announced by the West on Saturday is partial, leaving Europe and the United States room to escalate penalties further later.

Boris Johnson said the SWIFT banking system is "incredibly important" for putting economic pressure on Russia.

Asked whether the UK needs to do more to push other countries to ban Russia from Swift, Mr Johnson said: "I think that what you've seen just today is more countries joining the call of the UK to use Swift.

"Swift is the mechanism that stops people making payments to Vladimir Putin's Russia.

"It's incredibly important for tightening the ligature - the economic ligature - around the Putin regime.

"And today you've seen more and more countries, France and others, coming forward to say that they will not block a banning, a boycott of Swift."

Ms von der Leyen said cutting several commercial banks off "will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally".

She said more banks could be hit "as appropriate".

Ms von der Leyen said the EU would "commit to taking measures to limit the sale of citizenship - so-called golden passports - that let wealthy Russians connected to the Russian government become citizens of our countries and gain access to our financial systems".