By Vusala Abbasova April 30, 2021
The Society for Worldwide Interbank Financial Telecommunication, or simply SWIFT, is a global transaction network that connects more than 11,000 banks operating in at least 200 countries.
As Brussels is tightening the screws on Russia by threatening to shut the country off from one of the quickest and safest ways to receive and send money via electronic bank transfers, Moscow is getting ready for any eventuality in case of a shutdown.
Andrey Krutskikh, Russian Special Presidential Envoy for International Cyber Security Cooperation, voiced Moscow’s readiness to respond if Russia is disconnected from the SWIFT global payment network. However, according to him, threats to disconnect Russia from the SWIFT system are unlikely to be realized.
“As far as the technological and military-political insurance against disconnection, one would have to ask specific specialists in these areas,” Gazeta.ru quoted Krutskikh as saying on Wednesday. “But our armored train stands on the side track, and, of course, we have full confidence in our strength and the power of our response.”
The Society for Worldwide Interbank Financial Telecommunication, or simply SWIFT, is a global transaction network that connects more than 11,000 banks operating in at least 200 countries. SWIFT is a cooperative society under Belgian law owned by its member financial institutions with offices around the world.
Earlier this week, the European Parliament called for harsh coordinated measures against Russia, including disconnecting from SWIFT. Officials in Europe accused Russia of what Manfred Weber, parliamentary head of the center-right European People’s Party, called “continuing the course of dangerous provocations” and “strengthening the military presence around eastern Ukraine.”
Fears that Russia might be cut off from the global system have been around since the 2014 Ukraine crisis. The same year, the United States and Europe imposed sanctions against Russia targeting multiple sectors, including financial sanctions.
Threats to prohibit Russia from using the international financial information exchange system reemerged in recent weeks amid worsening of relations between the Kremlin and Biden administration, with Washington slapping Moscow with new sanctions and threatening follow-up actions. By cutting off the Russian banks from the SWIFT system, the western countries could aim to crash the Russian payment transactions and subsequently disrupt the country's domestic and foreign economic activities.
To counter U.S. and European sanctions and protect its financial security, Russia began developing an alternative to the SWIFT payment system based on a new technological platform. Earlier, in an interview with RIA Novosti, Alexander Pankin, the deputy head of Russia’s Foreign Ministry, explained that future alternatives to SWIFT would be more advanced and not dependent on being a monopoly. The emergence of such options will be “not only a reaction to the current geopolitical situation but a response to the need to modernize the existing payment methods using the top digital innovations.”
As far back as 2014, the Russian Central Bank launched its System for Transfer of Financial Messages (SPFS) that was put into operation in 2015. The principle of operation of Russia’s SPFS is kept similar to that of the worldwide payment system to reduce the concerns of Russian customers and avoid the need to change their usage habits. So far, over 400 Russian companies (mostly banks), including eight foreign banks, use this system as an alternative to SWIFT.
Russia is not alone in attempting to bypass SWIFT. Iran has already launched a homemade financial telecommunications system, known as SEPAM, to get around the U.S. unilateral sanctions imposed on the country.
Some believe that the introduction of alternative payment rails will likely make it difficult for western countries to track payments across the globe and use the SWIFT system as a political tool to threaten or put pressure on other countries.