SWIFT or “Society for Worldwide Interbank Financial Telecommunication” is an international financial payments gateway. The Russian banks which are to be banned from SWIFT, could face a security issue during the international payments.
The European Union, United States and the other western countries moved to block the Russian banks access to the SWIFT international payments system for Russia’s invasion of Ukraine. It is the harshest sanction on Russia since the beginning of war in Ukraine.
With this ban, Russians can’t pay for the imports and can’t receive payments for the exports. Therefore, the traders of the other countries will also hesitate to do trading with the Russians. It will largely impact the oil and gas industry of the Russia.
The United States, European Union, France, Germany, Italy, Britain and Canada have announced this sanction on Russia. It will come into force in the coming days.
The US President Joe Biden has announced severe sanctions on the banks of Russia on thursday. These sanctions were aimed at limiting the Russia’s ability to do business in dollars, euros, pounds and yen. President also said that more severe sanctions will be announced in the coming days.
SWIFT is the world’s largest international payments network. Here’s everything you need to know about the SWIFT:-
What is SWIFT?
SWIFT or “Society for Worldwide Interbank Financial Telecommunication” is an international financial payments gateway. It secures the cross-border payments and sends message about the authentication and confirmation of the payments. It ensures the payer as well as the receiver that the payment is done successfully.
Based in Belgium, SWIFT provides its services to more than 11,000 banks in over 200 countries across the world. It was founded in Brussels on May 3, 1973.
How will its ban affect the Russian banks?
The Russian banks which are to be banned from SWIFT, will face a security issue during the international payments. In this case, Russia will have to use phones, messaging apps or emails for the payments. Its transaction cost will be high for Russia.
Moscow can also go for its own international payment system. It has tried earlier to make its own system with the help of China but it is not so successful.
However, Russia is to be banned from SWIFT but it could also hurt the banks and institutions of the US and other western countries.
Iran is the first country which was banned by European Union from the SWIFT in 2012 in relation to Tehran’s nuclear programme.