![]() Fully owned by Russia’s central bank, the card system operates as a clearing center for processing card transactions within Russia. The following month, the Russian government passed a new law introducing the National Payment Card System, later known as Mir (“World”). Both Visa and MasterCard suspended the targeted banks’ services and blocked them from using their payment systems. ![]() In April 2014, a number of Russian banks were blacklisted by the United States. Performing international transfers, however, would be an arduous task. If Russian banks are disconnected from the Visa and MasterCard payment systems, all domestic transactions could be done through the National Payment Card System. ![]() Since 2014, therefore, several countermeasures have been introduced to minimize the risks and potential economic damage to Russia. The cutoff would terminate all international transactions, trigger currency volatility, and cause massive capital outflows. Russia is heavily reliant on SWIFT due to its multibillion exports of hydrocarbons denominated in U.S. The impact on the Russian economy would be equally devastating, particularly in the short term. Still, Moscow has taken steps to secure its domestic financial system, with the case of Iran serving as a cautionary tale: after Iranian banks were disconnected from SWIFT, the country lost almost half of its oil export revenues and 30 percent of foreign trade. and German banks are the most frequent SWIFT users to communicate with Russian banks. The United States and Germany would stand to lose the most if Russia were disconnected, because U.S. Russia’s high level of interconnectedness with the West has worked as a shield. Since then, the likelihood of this nuclear option being implemented has remained low. Cutting Russia off from SWIFT was considered to be a major escalation, or, as then prime minister Dmitry Medvedev put it, tantamount to “a declaration of war.” Ultimately, the pressure campaign was dropped. Alexei Kudrin, Russia’s former finance minister, then forecast that such a move could cause Russia’s GDP to shrink by 5 percent. In August 2014, the UK appealed to European leaders to consider such an option. Presidential spokesman Dmitry Peskov said a potential cutoff was a serious threat, and that its implementation could not be ruled out.Ĭalls to exclude Russia from SWIFT are not new. The April 29 resolution passed by the European Parliament on excluding Russia from the SWIFT international payment system should its troops invade Ukraine may be legally nonbinding, but it did not go unnoticed by the Kremlin.
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