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Global Economy

"Targeted and functional SWIFT restrictions"

In response to the Russian attack on Ukraine, the German government announced that it would restrict the country's access to the SWIFT payment system. Federal Foreign Minister Annalena Baerbock and Vice Chancellor Robert Habeck said they were working on a “specific and functional restriction”. They did not speak of a complete exclusion of Russia. However, they are working "under high pressure on how the collateral damage of a decoupling (Russia) from SWIFT can be limited in such a way that it hits the right people," said the two Green politicians.

Federal Finance Minister Christian Lindner spoke of progress in the maximum isolation of Russia in the financial system. "They will now be completed at the highest level," he said. Due to their scope, however, the measures required great precision. The federal government is determined, but is aware of the enormous scope of the decisions.

Union faction wants to include SWIFT in sanctions

So far, Germany has rejected restricting SWIFT. Economists like Jörg Krämer, chief economist at Commerzbank, also explain this position with dependencies in the energy sector. If the Europeans wanted to continue buying gas from Russia, they would have to pay for it. "And if you can't do it by bank transfer, you would have to travel to Moscow with suitcases of money," which of course isn't possible, says Kramer.

The Union faction in the Bundestag asked Chancellor Olaf Scholz to agree to an immediate exclusion of Russia. "We firmly believe that SWIFT should and must be included in the sanctions that are now being imposed on Russia," said parliamentary group leader Friedrich Merz. He justified this with a "completely unrestrained involvement of the civilian population" in the Russian war of aggression in Ukraine.

France speaks of "financial nuclear weapon"

In addition to Germany, the governments of Italy, Luxembourg and Hungary had also been hesitant for a long time. In Rome, however, Prime Minister Mario Draghi was also willing to talk. Italy fully supports the EU's line on sanctions against Russia, "including those affecting SWIFT," he said.

Countries like France and Great Britain, which are less dependent on Russian oil and gas, have been campaigning for Russia's exclusion from SWIFT for some time. French Economy Minister Bruno le Maire said in a press conference after a meeting of EU finance ministers on Friday that SWIFT is a financial nuclear weapon. You think about it before you use it. British Prime Minister Boris Johnson called Russia's exclusion urgently needed.

Ukrainian President Volodymyr Zelenskyy had appealed to the EU to exclude Russia from the SWIFT system in addition to the sanctions that had already been decided.

SWIFT – important for international transfers

SWIFT is a communication system and is used to inform banks about payment flows across borders – transfers from private customers abroad also run via this system with the help of the so-called BIC number. The abbreviation SWIFT stands for "Society for Worldwide Interbank Financial Telecommunications" – translated: Society for worldwide financial telecommunications. The organization in the form of a cooperative was founded in 1973 and has its headquarters south of Brussels in the small town of La Hulpe.

German companies sold goods worth 26.6 billion euros to Russia in 2021. A quick exit from SWIFT would primarily affect companies that are currently still waiting for payments from Russia.

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