The United States and the European Union have decided to partially implement economic penalties against Russia by disconnecting a number of Russian banks from SWIFT, the key international payment system. Russia’s central bank assets are also frozen, limiting Moscow’s ability to access its foreign reserves.
What is SWIFT?
The SWIFT system, which stands for Society for Worldwide Interbank Financial Telecommunication, is a secure platform for financial institutions to transmit information regarding international monetary operations including money transfers. Governing of SWIFT is taken care of by the central banks of eleven industrial countries, including Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States, in addition to Belgium.
SWIFT does not directly move money, it serves as a middleman for more than 11,000 institutions in over 200 countries by providing secure financial communications services.
How will exclusion from SWIFT affect Russia?
These joint penalties are the most severe against Moscow since its forces invaded Ukraine, and they expect to have a significant impact on a country that relies significantly on the SWIFT platform for its crucial natural resource trade, particularly payments for oil and gas exports. In the financial realm, cutting a country off from SWIFT is the equivalent of restricting a country’s Internet access.
Removing Russian banks from the SWIFT platform is predicted to have a significant negative impact on the country’s economy.It will affect the already collapsed Russian economy.Currently the only Country excluded from SWIFT is Iran. Since the exclusion, Iran’s economy and its foreign trade has completely collapsed.
While the prohibition may take some time to take effect, it is crucial to note that it demonstrates a significant commitment from Western countries.The things are quite heating up in Moscow as per some reports regarding their exclusion. Ukraine government welcomed the plans of western countries calling it a brave move.Time will tell us the future crisis of Russia’s economy.
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