Russia might face SWIFT banking network ban

Prime Minister David Cameron’s government plans to include this topic on the agenda for an upcoming meeting of EU leaders in Brussels, according to an official cited by the source.

“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, cited by the source. “An exclusion from SWIFT would not block major trade deals but would cause problems in cross-border banking and that would disrupt trade flows.”

According to Reuters, faced with the risk of losing access to the network, Russia’s government has already drawn up a law that would create a local equivalent of the interbank payment system. Although the law has been drafted, it will not become policy until it is clear that the central bank has the technology to enable processing of interbank transactions within Russia.

Russian newspaper Kommersant has reported that the central bank had sent a letter to banks asking them to consider alternative mechanisms for inter-bank payments, citing national security concerns. According to the paper, only about 5-10 percent of payments involving Russian banks are presently made inside the country.

The plans to develop a domestic alternative to SWIFT follow steps to create a national payment system for processing credit card transactions, after Visa and MasterCard stopped providing services for some Russian banks that were subject to Western sanctions.

SWIFT is one of Russia’s main connections to the international financial system. The SWIFT system transmitted more than 21 million financial messages a day in August 2014, between more than 10,500 financial institutions and corporations in 215 countries. In 2012, SWIFT cut off Iranian banks that were the subject of European Union sanctions over Irans nuclear programme.