Will Biden mount a SWIFT response to Russian aggression in Ukraine?

If President Biden wanted to swing a big stick at President Vladimir Putin to deter him from invading Ukraine, which stick could he use?

National Security Advisor Jake Sullivan offered a clue when discussing the recent call between President Biden and his Russian counterpart. Fielding a question about what type of response the Kremlin should expect, Sullivan had this to say: “President Biden looked Putin in the eye and told him today, that things we did not do in 2014 we are prepared to do now.” 

Secretary of State Antony Blinken echoed the same sentiment again on Meet The Press this weekend, almost quoting Sullivan word for word and reiterating that the U.S. remains “prepared to take the kinds of steps we’ve refrained from taking in the past” should Russian aggression continue. 

So, what are these “high-impact economic measures” that the President himself said would bring “devastating” consequences for the Russian economy?

It’s likely a plan to disconnect Russia from SWIFT. 

What is SWIFT?

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication–a Belgian-based multinational cooperative that serves as an intermediary facilitating financial transactions between global banks. 

SWIFT provides a standardized global service that enables countries to easily and quickly transfer money across borders. While SWIFT doesn’t move or hold any currency themselves–the banks still do that–the systems operated by SWIFT make these transfers possible. 

The important takeaway is the absolute ubiquity of SWIFT in 2021: it underpins global commerce by connecting over 11,000 banks in more than 200 countries. Close to 32 million transactions per day flow through SWIFT systems. 

Disconnection from the world’s financial transactions would be disastrous for a large, globally integrated country like Russia.

Has this happened before? 

To deter Iran from further developing nuclear technologies, the United States and the European Union successfully pressured SWIFT to blacklist Iranian banks in 2012. Access was eventually restored in early 2016 as part of the Iran Nuclear Deal. 

In 2018, unilateral pressure from the United States over Iran’s nuclear program led SWIFT to again blacklist Iranian banks.

Using SWIFT as a cudgel against Russia in response to the initial 2014 invasion of Ukraine was seriously debated. The Obama administration ultimately elected to take a more targeted approach despite concluding that Russia was not “too big to be sanctioned“ in this manner. 

While applying a measure as severe as a disconnection from SWIFT against Russia hasn’t yet happened, it continues to come up as a potential response to various situations. Most recently, calls to employ a SWIFT disconnect came in response to the January arrest of Alexei Navalny, a Russian dissident leader, and again during heightened tensions along the Ukraine border earlier this year. 

What is Russia saying?

In recent public statements, Russian officials were unmoved at the prospect of a change in their relationship with SWIFT, calling a disconnection over Ukraine a “fantasy” and dismissing a joint G7 statement warning of “massive consequences” as nothing more than “aggressive slogans.”

However, Russia has been developing an alternative to SWIFT called SPSF since 2014, when the prospect of a disconnect was first realized. Russia is not the only nation to see the utility of a SWIFT alternative: China, which operates a domestic financial messaging system called CIPS, and other BRICS nations have reportedly expressed interest in linking to Russia’s SPSF. 

Renewed fears of economic upheaval have also triggered an exploration of how cryptocurrency and blockchain technology could help Russia better buffer any shock brought by more extreme financial repercussions.

It’s worth noting that Russia has also developed a domestic internet for very similar reasons: limiting vulnerabilities should future actions run afoul of international bodies.