European banks are worried the payment system which connects them to Russia could fall apart if Vladimir Putin invades Ukraine and sanctions are imposed on Moscow. The SWIFT international payment system could cut Russia out, leading to billions of dollars of unpaid debts for countries with subsidiaries in Russia.
SWIFT is a telecommunication service used by over 11,000 financial institutions around the world to send secure messages and payment orders.
Moscow has hit back with threats that other European countries would not receive essential supplies from Russia such as oil, gas and metals if it is cut off from the global banking system.
French and Italian banks had outstanding claims of $25billion in Russia in the third quarter of 2021.
Austrian banks were owed $17.5billion and the US was owed $14.7 billion.
Cutting Russia off would make it nearly impossible for money to be sent in and out of the country, devastating not only Russian companies but also their foreign customers.
Heinrich Steinhauer from the German lender Helaba in Moscow said for many in the European Union this would be a “catastrophe”.
German and American banks have the most frequent SWIFT communication with Russian banks, meaning they would have the most to lose.
However, Prime Minister Boris Johnson has said he is in talks with the US to disconnect Russia from SWIFT.
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But the Vice Speaker of Russia’s Upper House in Parliament, Nikolai Zhuravlev, argued that SWIFT is an association of many countries across Europe and that the decisions of the UK and US would not be enough.
The US and the EU introduced anti-Russian sanctions back in 2014 after the annexation of the Crimean peninsula.
Since then, foreign bank exposure to Russia has more than halved.
In 2012, Iran was removed from SWIFT following EU sanctions over its nuclear programme.
As a result, Iran lost 30 percent of its foreign trade and almost 50 percent of its oil export revenue.