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SWIFT Ban on Russia | Russia Ukraine War

SWIFT Ban on Russia- Relevance for UPSC Exam

  • GS Paper 2: International Relations- Effect of policies and politics of developed and developing countries on India’s interests.

SWIFT Ban on Russia | Russia Ukraine War_40.1

 

SWIFT Ban on Russia- Context

  • Recently, the US and European Union (EU) have decided to partially exercise the SWIFT mechanism by cutting off a number of Russian banks from the main international payment gateway, SWIFT.
  • The assets of Russia’s central bank are also expected to be frozen, constraining Moscow’s ability to access its overseas reserves.
  • The intention of the moves is to “further isolate Russia from the international financial system”.

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What is SWIFT?

  • About: SWIFT is a secure platform for financial institutions to exchange information about global monetary transactions such as money transfers.
    • SWIFT Headquarters: SWIFT is based in Belgium.
  • SWIFT Acronym: The SWIFT system stands for the Society for Worldwide Interbank Financial Telecommunication.

Russia Ukraine War | Russia attacks Ukraine and India’s Diplomatic Dilemma

 

How does SWIFT work?

  • While SWIFT does not actually move money, it operates as a middleman to verify information of transactions by providing secure financial messaging services to more than 11,000 banks in over 200 countries.
  • SWIFT Administration: it is overseen by the central banks from eleven industrial countries: Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States, besides Belgium.

India’s stand on Russia-Ukraine Conflict

 

How will SWIFT Impact Russia?

  • Excluding Russian banks from the SWIFT platform is expected to hit the country’s economy hard will make the country rely on “the telephone or a fax machine” to make payments.
  • Excluding Russian banks from the SWIFT platform is going to be a catastrophe on the Russian currency market.
  • The banks affected are “all those already sanctioned by the international community, as well as other institutions
  • While workarounds to SWIFT have been tried, none have proven to be effective.

 

Russia Ukraine War | Russia attacks Ukraine and India’s Diplomatic Dilemma

Russia Ukraine War | Russia attacks Ukraine and India’s Diplomatic Dilemma

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