While some nations (UK, Poland, and Lithuania for example) are pushing hard for Russia to be shut out of SWIFT - the global electronic payment-messaging system - many others are anxious of executing the so-called 'nuclear option' for fear of the potential blowback.
“The EU isn’t on board with removing Russia from SWIFT for one thing because the EU isn’t on board with letting go of Russian energy,” said Erik Meyersson, a Stockholm-based senior economist covering the Eurozone at Svenska Handelsbanken AB.
The former president of the European Council, Donald Tusk, was unhappy that some nations - Germany, Italy, and Hungary (who just happen to get significant amounts of their energy supply from Russia) rejected the call for SWIFT shutout...
In this war everything is real: Putin’s madness and cruelty, Ukrainian victims, bombs falling on Kyiv. Only your sanctions are pretended. Those EU government’s, which blocked tough decisions (i.a. Germany, Hungary, Italy) have disgraced themselves.— Donald Tusk (@donaldtuskEPP) February 25, 2022
As a reminder, The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is the financial-messaging infrastructure that links the world’s banks. The Belgium-based system is run by its member banks and handles millions of daily payment instructions across more than 200 countries and territories and 11,000 financial institutions. Iran and North Korea are cut off from it.
So, given all that, Goldman Sachs' Allison Nathan asked the question on everyone's lips:
"The removal of Russia from SWIFT - the global electronic payment-messaging system - has been referred to as the “nuclear option” for sanctions. Do you agree with that characterization?"
Eddie Fishman - the former Russia and Europe Lead in the US State Department’s Office of Economic Sanctions Policy and Implementation - responded in a fascinating way:
"No - it’s not even close to being the nuclear option... SWIFT is just a messaging service. If the US and Europe decided to cut Russians banks off from SWIFT without imposing full-blocking sanctions on them, they could still transact with US and European financial institutions - they just couldn’t use SWIFT to do so."
Fishman went on to point out a potentially even bigger blowback consequence for the West's actions:
"...and in a perverse way, that may actually increase the demand for SWIFT alternatives, such as Russia’s own System for Transfer of Financial Messages (SPFS)."
Russia could also be tempted to move to China’s financial messaging system, Austrian Chancellor Karl Nehammer told reporters on Thursday.
Suspending Swift “would hurt Russia less than the European Union,” he said.
Interestingly, given Germany's prior comments against SWIFT termination, Bloomberg reports that Germany's finance minister shocked more than a few marketwatchers this afternoon by saying that 'we are open to cutting Russia off SWIFT' with a German government advisor telling RND that "banning Russia from SWIFT is manageable."
BREAKING — Germany is open to cut Russia off from the SWIFT system: German economy minister— Ragıp Soylu (@ragipsoylu) February 25, 2022
In the last few hours, several European officials have pushed the idea of SWIFT access termination for Russia, following President Biden's comments that "barring Russia from SWIFT remains an option."
UK's Johnson "wants Russia banned" from the SWIFT payents system.
Holland's Rutte said "many EU officials wanted Russia shut out of SWIFT," adding that "more work must be done on possible SWIFT measures." Furthermore, Rutte commented that EU "took a step forward" on removing Russia from SWIFT, but offered no details.
EU Commission's Valdis Dombrovskis warned "all options are on the table including SWIFT exclusion."
And now it appears Italy is falling inline too...
Call with my Italian counterpart @luigidimaio. Full solidarity with Ukraine. My colleague assured me that Italy will support banning Russia from SWIFT.— Dmytro Kuleba (@DmytroKuleba) February 25, 2022
Finally, European Union Commissioner for the Economy Paolo Gentiloni says the EU and ECB will hold talks within days to consider disconnecting Russia from SWIFT, the dominant messaging system behind global payments.
"We are considering also the possibility to use this tool, but this needs a little bit more of looking in-depth," he said on "Bloomberg Markets: European Close."
However, amid all this bravado, the question really is - if (as Goldman believes) termination from SWIFT is not the 'nuclear option', what leverage does NATO really have (apart from the real MAD 'nuclear option') to halt Putin's advance? And energy-anxiety aside, do China and Russia (and the 400 or so entities tied to their payment messaging systems) need another excuse to shift - permanently - away from the weaponization of the dollar reserve.