US, UK, Europe, Canada to block Russian access to SWIFT – UPDATED

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WASHINGTON/BRUSSELS, Feb 26 (Reuters) – The United States, Britain, Europe and Canada on Saturday moved to block Russia’s access to the SWIFT international payment system as part of another round of sanctions against Moscow as it continues its assault against Ukraine.

The measures, which will also include restriction on the Russian central bank’s international reserves, will be implemented in the coming days, the nations said in a joint statement.

“We commit to ensuring that a certain number of Russian banks are removed from SWIFT,” Ursula von der Leyen, president of the European Commission, the European Union’s executive, said in a statement to the media.

“This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.”

She said that cutting Russian banks off the system will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports.

She said allies would stop Russia from “using its war chest,” paralysing the assets of its central bank, freezing its transactions and making it impossible for the central bank to liquidate its assets.

“Finally, we will work to prohibit Russian oligarchs from using their financial assets on our markets,” she said.

EU foreign ministers will discuss the sanctions package at a virtual meeting on Sunday evening, the fourth time they come together in a week.

Ukraine is grateful for financial sanctions imposed on Russia – PM

Ukraine is grateful for the latest round of financial sanctions imposed on Russia by the United States and its allies, Prime Minister Denys Shmygal said in a Twitter post early on Sunday.

“Thanks to our friends … for the commitment to remove several Russian banks from SWIFT” and for “the paralysis of the assets of the central bank of Russia,” he said.

(Reporting by David Ljunggren; Editing by Cynthia Osterman)

Explainer

SWIFT is the world’s main international payments network. Here is more about what it does and why it matters:

WHAT IS SWIFT?

SWIFT, or the “Society for Worldwide Interbank Financial Telecommunication”, is a secure messaging system that facilitates rapid cross-border payments, making international trade flow smoothly.

Banks which connect to the SWIFT system and establish relationships with other banks can use SWIFT messages to make payments.

The messages are secure so that payment instructions are typically honoured without question. This allows banks to process high volumes of transactions at speed.

It has become the principal mechanism for financing international trade. In 2020, around 38 million SWIFT ‘FIN messages’ were sent each day over the SWIFT platform, according to its 2020 Annual Review. Each year, trillions of dollars are transferred using the system.

WHO OWNS SWIFT?

SWIFT, founded in the 1970s, is a co-operative of thousands of member institutions which use the service.

Based in Belgium, SWIFT made a profit of €36 million in 2020, according to its 2020 Annual Review. It is run principally as a service to its members.

WHY IS A SWIFT BAN SO SERIOUS?

Excluding Russian banks from SWIFT restricts the country’s access to financial markets across the world.

Russian companies and individuals will find it harder to pay for imports and receive cash for exports, borrow or invest overseas.

Russian banks could use other channels for payments such as phones, messaging apps or email. That would let Russian banks make payments via banks in countries which have not imposed sanctions but since alternatives are likely to be less efficient and secure, transaction volumes could fall and costs rise.

HOW WOULD SWIFT BAN ON RUSSIA AFFECT OTHER COUNTRIES?

Exporters would find selling goods to Russia riskier and more expensive.

Russia is a big buyer of manufactured goods. The Netherlands and Germany are its second and third biggest trading partners, based on World Bank data, although Russia is not a top 10 export market for either country.

Foreign buyers of Russian goods would also find it more difficult, potentially prompting them to seek alternative suppliers.

But when it comes to Russian oil and gas, foreign buyers could find it harder to find replacement suppliers.

Russia is the main EU supplier of crude oil, natural gas and solid fossil fuels, according to the European Commission.

IS SWIFT BOUND BY ECONOMIC SANCTIONS?

SWIFT is bound by Belgian and European Union rules, which would include economic sanctions.

SWIFT’s website says: “Whilst sanctions are imposed independently in different jurisdictions around the world, SWIFT cannot arbitrarily choose which jurisdiction’s sanction regime to follow.”

In March 2012, the European Union barred SWIFT from serving Iranian firms and individuals which had been sanctioned in relation to Tehran’s nuclear programme. The list included the central bank and other big banks.

(Reporting by John Chalmers and Sabine Siebold in Brussels; Reporting by Daphne Psaledakis, David Morgan and Susan Heavey in Washington; Editing by Leslie Adler and Cynthia Osterman)

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