Ukraine: the EU and its allies decide to exclude several Russian banks from Swift

The European Union, the United Kingdom, the United States, Canada and Japan have decided to exclude many Russian banks from Swift (Society for Worldwide Interbank Financial Telecommunication), the world's most widely used international interbank payment system. What are the consequences for Russia?

The reluctance of Italy and Germany, dependent on Russian gas

While the majority of Western countries had been in favor of excluding Russia from the Swift network for several days, some European countries remained reluctant, notably Italy and Germany.

Both countries rely on Russian gas supplies, especially Germany, Russia's most important European partner. Gas accounts for a quarter of Germany's energy consumption, half of which comes from Russia. In France, Russian gas accounts for 17% of the country's gas consumption.

Germany uses the Swift interbank payment system to settle its gas purchases from Russia. By disconnecting the latter from Swift, the European Union is exposing itself to a significant slowdown in Russian gas and oil supplies.

Russia's fossil fuel exports account for a significant proportion of the 42 million financial messages that pass through Swift every day, between the 11,000 institutions connected to the network in over 200 countries. These financial messages may correspond to transactions, orders, stock market orders or payment confirmations.

Exclusion of Swift: major economic consequences

Under pressure from other European countries, Italy and then Germany finally agreed to the exclusion of many Russian banks from Swift. The European Union is joined in this decision by the United States, the United Kingdom, Canada and, since Sunday, Japan, which has also taken measures to limit semiconductor exports to Russia.


Exclusion from the Swift network will have a major impact on the Russian economy. According to Western experts, this sanction, described by French Finance Minister Bruno Le Maire as a veritable " financial nuclear weapon ", could cost Russia 7% of its GDP. During the Crimean War in 2014, when the exclusion of Swift had been mooted but not implemented, Russia itself had estimated that such a sanction could cause its GDP to fall by 5%.

While the decision to exclude Russia from the Swift network was taken on February 26, many Russians began making massive withdrawals on the 27th. Several European subsidiaries of the Russian bank Sberbank Europe AG are already bankrupt, and the ruble has plummeted by 30% against the dollar.

Since the Crimean War, Russia has tried to build an alternative to Swift so as not to depend on this network. In 2017, it set up the SPFS system, which is far from being able to replace Swift. It brings together around 400 Russian banks, and only a dozen foreign institutions, notably in China and Belarus.

While the SPFS system may be useful for avoiding too much disorganization, it will not enable Russia to deal with Western countries. What's more, SPFS lacks the performance of Swift: while Swift can handle messages of up to 10 megabits, SPFS tolerates a maximum size of 20 kilobits, and the system does not operate continuously. Currently, one-fifth of Russian financial transactions pass through SPFS.

While the Russian economy will undoubtedly suffer from its disconnection from Swift, the sanction is not without consequences for Western countries either.

On the one hand, they will no longer benefit from the unofficial control over global financial flows afforded by Swift. On the other hand, in addition to problems with the supply of fossil fuels from Russia, many companies risk having to halt their exports for lack of payment. The European Union exports 89 billion euros worth of goods to Russia every year, including 5 billion for France.