Dmytro Kuleba, the Ukraine foreign minister, called
the global powers to ban Russia from SWIFT as the country’s military forces
under the leadership of President Vladimir Putin invaded Ukraine and wreaked
havoc on its neighbour. The Russian forces entered Ukrainian territory on Thursday as
Putin decided to send a ‘peacekeeping force’ to protect the people of Ukraine
from the ‘nazi’ government and to ‘de-militarize’ Ukrainian forces. In the name
of sending ‘peacekeeping force’, Putin waged war on Ukraine and the force kept
destroying properties of the nation. Hospitals were bombed, civilians were
killed and thousands of people fled the country to take shelter in neighbouring
countries to save their lives.
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Amid such a horrific situation when the west
expressed ‘concerns’ and is still discussing their next step to push back Putin
to his own den, Ukrainian foreign minister Dmytro Kuleba pleaded with the world powers
on Twitter to ban Russia from SWIFT. “I will not be diplomatic on this.
Everyone who now doubts whether Russia should be banned from SWIFT has to
understand that the blood of innocent Ukrainian men, women and children will be
on their hands too. BAN RUSSIA FROM SWIFT,” Kuleba wrote on Twitter.
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So, why is Kuleba calling for Russia’s ban from SWIFT?
What will a SWIFT ban mean for Russia?
What is
SWIFT?
SWIFT is the abbreviation for Society for Worldwide
Interbank Financial Telecommunication. It is being considered a secure
international banking system to send and receive payments from another country,
making international trade swift and easy. The system has been developed to
improve transactions cutting across the border to make the process of trade
seamless. In 2020, about 38m million transactions were recorded in a day on the
SWIFT platform, facilitating trillions of dollars worth of deals.
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Who owns
it?
Founded in 1973, SWIFT is a co-operative of more
than 11,000 financial institutions from across 200 countries and territories
that use the service. Based on Belgium’s La Hulpe, it remains neutral in trade
disputes, being run principally as a service to its members.
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Why is
Ukraine calling for a SWIFT ban on Russia?
United Kingdom Prime Minister Boris Johnson told
British MPs that if Russia is cut off the SWIFT banking system, it would upset
the Russian economy massively. It would force Russia, which is a major source
of gas and oil for most of Europe’s developed nations, to opt for a run of mill
transactions between banks, or routed through fledgling rival systems, adding
to heavier costs and delays in transactions.
Why are
the US and western European nations reluctant to cut Russia off SWIFT?
Countries like Germany and France are dependent on
Russian gas. So, initially, these two countries’ response to Russia’s military
deployment on the Ukraine border was softer. They issued mild protests but
barred themselves from issuing warnings or taking stances as the United Kingdom
did. It also has to be mentioned that Ukraine is also fully dependent on
Russian gas and oil. Though Ukraine, the victim of a Russian military attack,
calling for a ban on Russia, European Union member nations found themselves in
a puzzle. Germany even categorically said that Russia should not be banned from SWIFT.
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The US believes that the impact of the ban on
Russian businesses might not be so serious. The head of a large Russian bank,
VTB, said recently that Russia could use other channels for payments, such as phones,
messaging apps or email. Russian banks could also route payments through a
Chinese system. China is friendly to Putin. A ban on Russia from using SWIFT
would mean that Putin will opt for SWIFT’s rival China’s Cross-border Interbank Payment System (CIPS). There is
also a fear that the US dollar could incur losses in the global currency status
rank, and accelerate the use of alternatives such as cryptocurrencies.
