I read that several Russian banks got banned from SWIFT (mirror) following the ongoing 2022 Russian invasion of Ukraine. What's the point of banning a few selected Russian banks from SWIFT? I would have guessed it is mostly useless as one could simply use a Russian bank that is still allowed in SWIFT.


7 Answers 7


The point is to move the needle higher on economic sanctions against Russia. It was unprecedented when Iranian banks lost access to SWIFT in 2012, but it can be argued that it is again unprecedented against Russia today, as a member of the G20. It is much harder to convince countries who depend on trade with Russia to remove the first bank than it is subsequent banks, up to a point.

It is still currently unclear exactly what the impact will be, I do not believe a complete list of Russian banks who will be impacted has actually been released yet. The actual list is likely still yet to be determined, but so far we just don't know.

Here is a quote of the actual commitment from the Joint Statement on Further Restrictive Economic Measures, issued 26 February 2022. It does not go into detail about what specifically is going to happen:

First, we commit to ensuring that selected Russian banks are removed from the SWIFT messaging system. This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.

(source 1) - US Government Website

(source 2) - EU Government Website

SWIFT themselves published an announcement on 15 March 2012 (source) when they were instructed to disconnect Iranian banks from their system. They provide from there a link to Council Regulation (EU) No 267/2012, dated 23 March 2012 (eight days later). From that order, look for Annex VIII starting on page 51 and Annex IX starting on page 60. Until that level of detail can be reached as a result of diplomatic negotiations, it's entirely unclear what the level of impact within Russia will be. So far I think all that has been achieved are commitments from countries who have previously been holdouts against removing Russian banking access to restrict "some banks".

Potential Impact

According to The Bank of Russia, as of 1 January 2022:

There are 333 operating banks (230 banks with a universal licence and 103 banks with a basic licence) and 35 non-bank financial institutions in Russia.

(source) - Russian Government Website

One estimate given for the number of Russian banks currently using SWIFT is "some 300". From that same source, by losing access to SWIFT, businesses and individuals who are customers of those banks will find it much harder to operate economically outside of Russia's borders:

If Russia's banks were banned from SWIFT, they would find it much harder to access financial markets around the world. As a result, it would be much harder - although not impossible - for Russian businesses and individuals with bank accounts in the country to import and export goods, and borrow and invest abroad.

My understanding of this is that potentially every bank currently operating in Russia could lose access to international funds, as well as other lending and credit markets. Certain sectors of the Russian economy could potentially be targeted, depending on what banks are included and what industries they generally serve, and outside of Russia the ruble will be much harder to exchange. Goods generally purchased inside of Russia but imported from elsewhere may become more scarce, leading to rising prices and (potentially) extreme inflation.

However, given the moderating language that only "selected" banks will be targeted, it is just as likely that the number of banks affected will be much lower. The arguments against completely removing all Russian banks from operating are generally to prevent a complete collapse of the Russian economy and the follow-on effects that would have to countries which depend more on trade with Russia. I have also seen a few arguments about the morality of preventing too much suffering from hitting the citizens of Russia, who may not all agree with the decisions their government has taken.

The announcement itself has caused the price of the ruble to drop, so Russian banks who now would wish to draw back funds which are now stored in other currencies are going to have to convert it to much less than before. Combined with typically easily-spooked investors, a measure of economic damage has already been inflicted just by reaching an agreement. (source)

You will probably get a better understanding of what the overall potential impacts might be by asking a question over at Economics.SE. A quick search I was able to find this one already asked:

Which sanction against Russia creates the least side effects on Western economies: SWIFT disconnect or denying selling of government bonds?

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    "The announcement itself has caused the price of the ruble to drop, so Russian banks who now would wish to draw back funds which are now stored in other currencies are going to have to convert it to much less than before." If the funds are in non-ruble currencies, then they are now worth more rubles. Commented Feb 28, 2022 at 6:52
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    "it can be argued that it is again unprecedented against Russia today, as a member of the G20" It can be equally argued that it is unprecedented for Russia, a G20 nation, to invade a sovereign nation with no pretext other than self-interest
    – Haydentech
    Commented Feb 28, 2022 at 9:42
  • Wasn't Russia kicked out of the G20 a while back?
    – Vikki
    Commented Feb 28, 2022 at 10:14
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    @Vikki No, Russia was removed from the G8, causing it to revert to its previous moniker, G7. Russia is still part of the G20 (though some countries did suggest removing it from them as well).
    – TylerH
    Commented Feb 28, 2022 at 14:21
  • And what is the point of giving Russian billionaires so much time to move their money out of Russia? Commented Feb 28, 2022 at 20:42

It makes doing business more difficult (and more expensive) for Russians, while still allowing the US to buy Russian oil and Europe to buy Russian gas.

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    It appears quite a few gas contracts contain a termination clause in case the buyer is unable to pay, even for technical reasons. A full SWIFT disconnect would trigger these clauses, which would put the buyer in the unenviable position to renegotiate a contract at the current gas prices.
    – MSalters
    Commented Feb 28, 2022 at 11:26
  • @MSalters I was also under the impression that a SWIFT ban disrupts all trade, including gas and oil. Which is why the ban is targeted and not universal (it is still winter). Commented Mar 1, 2022 at 9:30
  • The main effect of excluding banks from Swift is an immediate and drastic interruption in trade: Neither party can pay for goods received and services rendered any longer.
  • There are two reasons to interrupt trade at all: To bring about a change in Russian behavior; and to satisfy public demand for a reaction.
  • Trade is a mutually beneficial interaction. Therefore, regrettably, disrupting trade hurts both parties involved.
  • Excluding some, but not all Russian banks from Swift interrupts some, but not all trade.

Given these premises:

Excluding some, but not all banks from Swift is an attempt to find a sweet spot between satisfying public demand for action and affecting Putin's behavior on one side and not inflicting too much pain on Western economies on the other side. Apart from the overall economic fallout of such a measure there are also particular interests: Special interests of influential constituents important to decision makers, and entire economic sectors important to some countries. That's why some decision makers and entire countries are more opposed to excluding Russia from Swift.


Well, it's a bit unclear how much of this a direct effect and how much is psychological, but today, as markets reopened, several things happened:

  • The rouble plunged 30% against the USD.

  • The Russian central bank was forced to raise interest from 9.5% to 20%!

  • The ECB announced that "Sberbank Europe AG, which had total assets of €13.64bn" is likely to go bankrupt due a rapid outflow of capital. (Sberbank Europe AG is "100 percent owned by the bank's Russian parent company" )

Regarding the RCB interest rate, even TASS notes that "This is an all-time high of the key rate. The previous record of 17% was hit in December 2014."

Later in the day, the Russian central bank announced that the Moscow stock market will be closed for the whole week (up from just a two-day closure announced earlier, after the $200 billion wipeout out last week.)

And interestingly Putin appears to see a technical default on external debt as some kind of win for Russia, given his decree later in the day, apparently forbidding repayments, if Bloomberg is correct:

President Vladimir Putin today banned all Russian residents from transferring hard currency abroad, including for servicing foreign loan contracts, potentially putting much of the country’s $478 billion in external debt at risk of default.

There was some uncertainty on what Putin's order actually meant, according to the experts cited by the WSJ

"Usually under sanctions there are always exceptions for paying coupons and repaying bonds," said Jerome Legras, managing partner of Axiom Alternative Investments. "I would be very surprised if coupon payments from VTB for example were not allowed."

Blocking payments could lead to imminent default on Russian debt, said Timothy Ash, an emerging-market strategist at BlueBay Asset Management. "It’s a little unclear whether this means individuals, companies or the state–or all of the above, but it's a very concerning headline," he said.

A block on paying debts could "hit Russia’s financing for years to come," he added. "It takes a long time for countries to get back to investment grade if they default."

Anyhow, the dollar-denominated Russian bonds rose to a 24% yield, from 3% at the begging of the year (same source--WSJ). Never mind that most Westerners are barred from even buying them now.

With more hindsight, we're seeing the effects on the Western-based subsidiaries of Russian companies:

Yandex (YNDX), which handles about 60% of internet search traffic in Russia and operates a big ride-hailing business, said Thursday that it may be unable to pay its debts as a consequence of the financial market meltdown triggered by the West's unprecedented sanctions. [...]

Yandex hasn't been sanctioned but it could still default. Investors who hold $1.25 billion in Yandex convertible notes have a right to demand repayment in full, plus interest, if trading in its shares are suspended on the Nasdaq for more than five days. The Moscow stock market will remain shut at least until Tuesday, Russian state news agencies reported on Friday.

"The Yandex group as a whole does not currently have sufficient resources to redeem the Notes in full," the company said in a statement. [...]

Sberbank (SBRCY), Russia's biggest lender, was forced to close its European arm earlier this week after it was prevented by the Russian central bank from sending money to its Vienna-based subsidiary following a run on deposits.

Even energy-related stocks have been hammered on the Western markets. On the London Stock Exchange:

Sberbank was down 99.72% year-to-date to trade for around a single penny before the suspension, while Gazprom was down 93.71%, Lukoil 99.2%, Polyus 95.58% and EN+ 20.51%.

And a week later...

The [Russian central] bank on Tuesday announced citizens with foreign currency accounts would not be allowed to withdraw more than $10,000 until Sept. 9 and told commercial banks to stop selling hard currency to clients.

Any withdrawals above that amount would be converted to rubles at the current exchange rates.

Between March 9 and Sept. 9 "the banks will not be able to sell foreign currencies to citizens," said the statement, a measure that will likely foment a black market for hard currency.

Basically, the convertibility of ruble is "destroyed" for the average Russian citizen. Welcome back to the USSR economy, at least for the next 6 months.

However, the heavy lifting in causing the central bank make this decision was probably not the SWIFT ban itself, but the more hardcore sanction that prohibited dealings/transaction (of most kinds) with the Russian central bank, with only some narrow exceptions allowed for energy payments, as I understand it. This essentially caused the bulk of the RCB's assets to be trapped/frozen abroad. However, these two sanctions (on most RCB transaction and SWIFT on the large Russian commercial banks) were introduced the same day, so it's a little difficult to separate their effects.

  • I think it's more of a market's expectation for Russia to go bankrupt(ish) soon because of the financial loss related to an unsuccessful war. Germany had the same issue after WWI, they didn't need to be cut off SWIFT for that to happen. Commented Mar 1, 2022 at 11:11

It appears that the EU and US are using a strategy of escalating sanctions. They do not start with the full set of sanctions. Instead, as Russia continues to occupy Ukraine, sanctions are increased.

This is a reasonable strategy. It means the Russian oligarchs receive bad news repeatedly, reminding them of the cost of supporting Putin.

For that reason, "banning a few selected banks" means that the EU and US can escalate the SWIFT ban further, simply by banning more and more banks. Because that is an easy option, the Russian oligarchs have to consider whether the effort to switch to another bank is worth it. By the time they've moved their capital, their new bank could well be hit by an expanded SWIFT ban - their move might itself trigger that.

  • why will they not exchange it all for euros? Commented Feb 28, 2022 at 20:51
  • @user253751 #1 they're Russians. #2 Russia almost certainly has currency controls. #3 Moving a billion Euros takes some time and planning.
    – RonJohn
    Commented Feb 28, 2022 at 23:17
  • @user253751: Exchanging requires two parties. European banks are not going to exchange euros for rubles. Perhaps a Chinese bank would do so, but that will come at a significant discount. That still means the sanctions are effective in causing pain for the oligarchs.
    – MSalters
    Commented Mar 1, 2022 at 8:54
  • @user253751 Banning a bank in SWIFT means it cannot process international orders at all, be in in rubles, euros or USD. Most accounts used in international trade are USD/EUR accounts to begin with, so there's nothing to exchange. Commented Mar 1, 2022 at 11:04

The banks being banned are not just random small businesses with few clients, they are among the 10 largest Russian banks accounting for more than a half of Russia's banking assets:

No.     Bank
1   Sberbank <- BANNED
2   VTB Bank <- BANNED
3   Gazprombank
4   Alfa-Bank
5   Rosselkhozbank
6   Credit Bank of Moscow
7   Otkritie FC Bank <- BANNED
8   Promsvyazbank
9   Sovcombank <- BANNED
10  Raiffeisenbank

Opening an account in a new bank, cancelling old transactions, starting new transactions, getting them properly insured, re-doing export paperwork is a huge interruption for a business. It takes weeks to get things on track, and the high probability of further sanctions makes it even more likely that a company doing business with Russia will simply suspend that part of their business until the things clear up (at least a cease-fire is in place), which is exactly what the sanctions are for.

I know a bunch of Russians (and Ukrainians) who work in French companies as trade agents for ex-URSS markets. Those companies are now trying to get paid for whatever they have already delivered to Russia, and are only planning new deals with Russia and Belarus for the year 2023.


The point, I think, is sabre rattling: The Western governments want to convince Putin that they can and will make it difficult for Russia by squeezing them financially. It makes sense from our perspective, because that is believed to have been the main factor in breaking the back of the USSR. The real question, however, is whether it is likely to work.

What we in the West have neglected, unfortunately, is that you must always leave an acceptable escape route open - a person who has no acceptable (to them) options left, becomes desperate, unpredictable and therefore dangerous, and then you have lost control of the situation.

When Putin came to power, we had an adversary, who was perhaps unpalatable, but mostly rational; we have now managed to create a desperate ruler who appears to feel he must threaten with his most powerful weapons, even if it means the end of everything, including his own country. If you don't believe it, read this BBC article.

Edit in view of some of the comments

The original question was

What's the point of banning a few selected Russian banks from SWIFT?

And I feel I have answered that, at least briefly: The West want to warn Mr Putin, but without causing massive damage from the outset; it's a warning shot that is intended to make Russia feel a bit bruised, so they hopefully moderate their stance and realise that it could become a whole lot worse. The question about SWIFT has already been addressed adequately by others - I don't really believe in scoring points by repeating what others have said.

But I think it is important to always seek out the wider context for any question about politics, because it is never as simple as what the politicians want us to believe.

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    My impression is this answer would be better for a different question. Maybe like question of "How to best defeat Putin?". Commented Feb 28, 2022 at 9:21
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    I don't think this answers the question about SWIFT, but your second paragraph describes Sun Tzu's 'golden bridge'.
    – JJJ
    Commented Feb 28, 2022 at 9:50
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    It is unclear how this answer applies to the question - specifically, why only a subset of banks?
    – MSalters
    Commented Feb 28, 2022 at 11:29
  • Giving Putin -- who directly lied to many of his western European allies -- a face-saving exit plan is at the very bottom of the priority list of the people that Putin lied to, since that makes his former European allies look even worse.
    – RonJohn
    Commented Feb 28, 2022 at 23:24
  • @RonJohn I recognise what you say - but what is more important? Sparing the hurt feelings of some, or avoiding the situation escalating completely out of control? My feelings say that Putin should be removed from power and put in front of the international criminal court - and preferably jailed for the rest of his life. But I think it would be more rational to for avert the danger of nuclear war.
    – j4nd3r53n
    Commented Mar 1, 2022 at 8:18

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