Until earlier this week, there was a firm plan to cut off Russian banks from the Swift payments network. Although it seemed most Western governments agreed on this course of action, it would be a harsh and aggressive stance. Russia remains somewhat of a rogue nation in this ecosystem, yet it seems things will remain as they are.
Russia Can Keep Using Swift
It is a fascinating financial landscape in which we live today. Most people assume everything is the same worldwide, and there is little or no discontent. In reality, things are very different, particularly where dissatisfaction is concerned. With the help of China, Russia has been working on an alternative payment system called CIPS for years. That system would remove the need for the US Dollar and other Western currencies altogether.
However, the CIPS system is not used for all transactions and may never be. Instead. Russian banks still rely on the Swift payment network to engage in business domestically and internationally. That situation almost changed courtesy of various Western governments looking to make a drastic change.
The plan was to cut Russian banks off from Swift altogether. While it remains unclear which countries backed the plan, it seems the financial heavyweights across Europe and the US favored such a harsh approach. After all, the West will not execute that plan despite Russia’s ongoing incursions throughout Ukraine.
Even though the West will not pursue the aggressive approach, Russian banks are not out of the woods yet. Therefore, an alternative approach is to introduce economic sanctions against significant Russian banks. Executing that approach may prove slightly more straightforward, although there will still be a trade-off between the benefits and potential drawbacks.
It would not be the first time a rogue or contested nation is cut off from Swift. Iranian banks were booted off the financial messaging network in 2012, even though that only lasted for three years. Doing the same to Russia is more complex, as the country has a viable alternative system to maintain a strong market position. Moreover, many European countries rely on gas and other exports from Russia, all of which would come to an abrupt halt following a Swift ban.