Western governments have threatened Russian President Vladimir Putin with an unprecedented package of sanctions aimed at deterring ukraine from invading, while russia’s removal from the international financial system SWIFT in particular appears to strike fear into the Kremlin’s heart.
According to CNN, SWIFT is a global banking network that connects thousands of banks and financial institutions around the world.
Founded in 1973, the SWIFT system is already used by more than 11,000 financial institutions to send secure messages, exchange money and order payments.
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So far, no alternative global system has been installed for SWIFT.
US lawmakers have proposed removing Russia from the SWIFT system in recent weeks, while Russian lawmakers have said that if this happens, oil, gas and mineral shipments to Europe will be halted.
If Russia is removed from the SWIFT system, it will become almost impossible for financial institutions to send money at home or abroad. This can also lead to a major crisis for Russian companies, foreign customers, and especially for buyers of oil and gas exports.
Former Russian Finance Minister Alexey Kudrin said the economy would shrink by 5 percent if his country was removed from SWIFT.
“Isolating Russia from SWIFT will end all international transactions and cause currency fluctuations and capital outflows,” said maria Shagina, a researcher at the Finnish Institute of International Relations.
Shagina, however, said that if this happens, the United States and Germany will lose a lot, because banks in these countries are in contact with Russian banks.
In 2012, Iranian banks were isolated from the SWIFT system after the European Union imposed sanctions over the country’s nuclear program.
Russia, which has piled its forces on the Ukrainian border, denies western claims that it intends to launch an attack on Kiev, stressing that all information about it is ‘false and aimed at escalating tensions in the region and inflaming russian opposition’.
