The European Union, United Kingdom, Canada, and United States announced Saturday that they would be kicking some Russian banks off of SWIFT, the messaging system used by banks that is key to accessing the international banking system and making transactions.
The possibility of the sanction has been part of much debate over the last few days; cutting Russia off from SWIFT would be a meaningful sanction but would potentially have far-ranging and potentially negative impacts to the broader global economy.
“We commit to ensuring that selected Russian banks are removed from the SWIFT messaging system,” the European Commission said in a statement, adding that the U.S., UK, and Canada have also signed onto the decision. “This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.”
Earlier Saturday, Ukrainian President Volodymyr Zelenskyy said he was hopeful this move would happen, and said it would result in “billions and billions of losses for Russia—a tangible price for this vile invasion of our country ... Ukraine won the attention of the entire civilised world. And the practical result? Here it is - SWIFT... Disconnecting from global financial civilization,” Reuters reported.
Ursula von der Leyen, president of the EU commission, tweeted that the move "will stop them from operating worldwide and effectively block Russian exports and imports." She also said that a separate sanction will "paralyze the assets of Russia's central bank. This will freeze its transactions. And it will make it impossible for the Central Bank to liquidate its assets."
The commission did not say which banks would be affected and did not immediately respond to a request from Motherboard. The move comes after days of Russian siege on cities all over Ukraine, including the capital Kyiv.
“Russia's war represents an assault on fundamental international rules and norms that have prevailed since the Second World War, which we are committed to defending,” the commission said. “We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”
As Motherboard explained earlier this week, SWIFT is the system that banks use to process transactions. It is used by more than 11,000 financial institutions and companies in more than 200 countries. More than 42 million transactions are processed on it each day. It is very rare for countries to be removed from the system. Prior to this move, Iran was the only country to have been previously removed from SWIFT.
Cutting Russia from SWIFT would “slow everything to a crawl,” George Pearkes, global macro strategist at Bespoke Investment Group, told Motherboard earlier this week. It was seen as a potentially extreme move by some leaders, and one they were reticent to do in part because Russian entities owe billions of dollars of debt to European banks; cutting them from SWIFT in theory makes it very difficult if not impossible for those entities to pay their debts, which means it will hurt not only Russia, but western companies and economies as well. It could also make it incredibly difficult if not impossible for European countries to purchase Russian gas, for example.
Given the situation on the ground in Ukraine, that may be a small price to pay in exchange for enacting a meaningful sanction. The impact of removing Russia from SWIFT will likely be felt immediately, though it of course depends on which banks are actually cut off.
Zelenskyy has been calling for days for this move, saying earlier Saturday that “our diplomats fought around the clock to inspire all European countries to agree on a strong and fair decision to disconnect Russia from the international interbanking network. We also have this victory.”