UK Prime Minister David Cameron called European leaders to block Russia from the SWIFT banking transaction system. However, in case the West takes this drastic measure, all payments between Russian banks and foreign banks will be frozen.
“Blocking Russia from the SWIFT system would be a very serious escalation in sanctions against Russia and would most certainly result in equally tough retaliatory actions by Russia,” said Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory. “An exclusion from SWIFT would not block major trade deals but would cause problems in cross-border banking and that would disrupt trade flows.”
Some experts say that a potential exclusion of Russia from SWIFT would be as if mobile communication was disabled: people would find a way to communicate - they would enable landline phones, but that would be quite aggravating.
SWIFT transmits 1.8 billion messages a year and embraces more than 10,500 financial institutions and corporations in 215 countries. Over 600 Russian banks are connected to SWIFT including the Bank of Russia and other major banks.
However, SWIFT is a private company so it would be quite problematic to ban it from doing business in Russia.
“Blocking Russia from SWIFT would be one of the most painful measures for the Russian banking system at the present level of confrontation with the West, and technically it is not difficult to do, but in this case there would be only Iranian scenario left – arrests of banks’ assets”, said Alexei Golubovich, managing director at Arbat Capital.