Why the initial hesitation in taking action?

One reason some European nations are wary is because cutting Russia out of the world banking system may well come at a cost to their own economies. TheEuropean Commissionsays Russia is the EU’s fifth-largest trading partner (the EU’s biggest goods exports to Russia in 2020 were machinery and transport equipment,chemicals,and manufactured goods). The SWIFT ban on some banks could make at least some of this more expensive and difficult.

Italy and Germany had particularly baulked at SWIFT action since it could hit them hard but as this recent move was announced,Germany’s Baerbock said,“after Russia’s shameless attack ... we are working hard on limiting the collateral damage of decoupling (Russia) from SWIFT so that it hits the right people.”

Another fear attached to a total SWIFT ban was that Russia could find ways to get around it,falling back on their own system,which would make it harder for the US to keep tabs on payments. Russia’s central bank has developed its own alternative to SWIFT called the System for Transfer of Financial Messages,but it is nowhere near as large as the SWIFT network – the Bank of Russia’s website says its system is used by about 400 banks.

There are also concerns about the potential role that could be played by cryptocurrencies to get around any sanctions,at a time when Western central banks are alreadywary about the rise of crypto assets as an alternative to government-backed money.

Has this been done before?

There is a precedent for SWIFT kicking out some banks:in 2012 it expelled Iranian banks sanctioned by the European Union. It reconnected many of the banks in 2016 after the sanctions were lifted.

And allies on both sides of the Atlantic considered the SWIFT option in 2014,when Russia annexed Crimea. Russia declared then that kicking it out of SWIFT would be equivalent to a declaration of war. The allies,criticised ever after for responding too weakly to Russia’s 2014 aggression,shelved the idea.

With wires,Rachel Clun

This article was first published February 25 and has since been updated.