What is Swift and what would shutting Russia out of it achieve?

[Nevilledog]

https://www.theguardian.com/technology/2022/feb/24/what-is-swift-international-payments-network-russia-sanction

Russia’s invasion of Ukraine has amplified pressure for tougher economic sanctions on Moscow. The Labour leader, Keir Starmer, was among many to call for Moscow to be shut out of Swift – the world’s main international payments network – with the aim of hitting Russian trade and making it harder for its companies to do business.

What is Swift?
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. It has become the principal mechanism for financing international trade. In 2020, about 38 million transactions were sent each day over the Swift platform, facilitating trillions of dollars’ worth of deals.

Who owns Swift?
Swift, founded in the 1970s, is a cooperative of thousands of member institutions that use the service. Based in Belgium, it remains neutral in trade disputes, being run principally as a service to its members.

Why would a Swift ban be so serious?
Boris Johnson told MPs it would harm the Russian economy if it were locked out of Swift. Run-of-the-mill transactions would need to be conducted directly between banks, or routed through fledgling rival systems, adding to costs and creating delays.

Why is the US reluctant to implement a ban?
One reason is that the impact on Russian businesses might not be so serious. The head of a large Russian bank, VTB, said recently he could use other channels for payments, such as phones, messaging apps or email. Russian banks could also route payments via countries that have not imposed sanctions, such as China, which has set up its own payments system to rival Swift. A ban on Russia using Swift could accelerate a the use of China’s rival Cips system. There is also a fear that it could damage to the US dollar’s status as the global reserve currency, and accelerate the use of alternatives such as cryptocurrencies.

*snip*

[TheBlackAdder]

1. SWIFT is the global banking standard and it is a pain for member banks to set-up & secure.

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There are very rigid security standard that have to be in place and regular audits of system infrastructure. The construct is difficult and CIPS uses the SWIFT standards for their message formats. It would just be too difficult for a bank to support two similar payment systems. That is why CIPS is mainly a Chinese internal system, with less that 200 external indirect banks.

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[WHITT]

2. Waste Of Time

Russian banks could also route payments via countries that have not imposed sanctions, such as China, which has set up its own payments system to rival Swift. A ban on Russia using Swift could accelerate a the use of China’s rival Cips system.

1) Putin already setup an alternative called SPFS years ago, and will likely merge with one China setup called CBIBPS, and they will then expand to Turkey, Iran, and other countries, allowing all of them to be protected.

Thereby making any threat by the U.S. moot, not to mention they can utilize any currency they want, instead of being limited to dollars by SWIFT. That especially benefits Putin, as he can use Rubles.

2) SWIFT risks more than $30 Billion stuck in the system if they do it.