The European Union, the US, and its allies have agreed to cut off several Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the international payment system. This move comes after the Vladimir Putin-led government decided to enter Ukraine claiming they want to “demilitarize” and “denazify” their NATO-inclined neighbour. 

In the coming days, selected Russian banks are to be removed from the SWIFT system, as per BBC. Russia relies on this system for both gas and oil exports, which forms the cornerstone of the Russian economy. 

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However, BBC also noted that this move could harm Western nations in business with Russia. They further reported the nations releasing a joint statement conveying the intent to restrict the Russian central bank’s international reserves. 

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Notably, SWIFT is a secure international banking system that nations use for seamless trade. With improved transactions, SWIFT has facilitated trillions of dollars of trade. It was initially founded in 1973 as a cooperative of 11,000 banks and financial institutions spread across 200 countries. 

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While UK Prime Minister Boris Johnson advocated the removal of Russia from the SWIFT network, countries like Germany and France were much more guarded in their approach. Russia’s removal means that the country’s trade transactions will slow down as it can no longer rely on the SWIFT service. Since France and Germany have close trade relations with Russia, the countries are bound to be affected as well. 

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Even the US was hesitant about the decision to remove it from SWIFT since Russia might be prompted to rely on the Chinese Cross-border Interbank Payment System (CIPS), which rivals SWIFT. Notably, China has shown some support to Russia over the ongoing incidents, and head of state Xi Jinping and Putin put up a show of undisputed unity during the Beijing Winter Olympics. Further, with the Russian expulsion from SWIFT, the US dollar could incur losses in the global currency status rank, while resulting in increased use of alternatives such as cryptocurrency.