Russias invasion of Ukraine is horrifying.
Western leaders, fearing a broader war, are responding primarily with economic sanctions.
But for a payments expert such as myself, this is something of a myth.
Yes, SWIFT messaging systems are a critical part of international economic activity.
SWIFT systems would also be a prime target in any cyberwarfare, though thankfully they are well defended.
It is an important symbol of global repudiation of Russias exercise of military force, but not much more.
To understand the limited practical effect of ejection from SWIFT, its worth looking at Iran.
The US has applied and periodically reinforced trade prohibitions against Iran ever since 1987.
Iranian banks were ejected from SWIFT only later, in March 2012.
This was only supplementary to direct restrictions on Iranian businesses and financial intermediaries.
Exclusion from SWIFT did not prevent them from doing this.
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So what is SWIFT for exactly?
How SWIFT works
SWIFTwas founded in 1973 to provide secure messaging for international payments.
It is a Belgian member-owned co-operative, with around 11,000 member banks from 200 countries and territories.
Nowadays, of course, these communications are internet-based.
Today, SWIFT handlesaround 40 millionpayment messages each day.
Suppose a London bank wants to send funds to a bank in Moscow.
It may use SWIFT messaging to communicate the payment, but not to execute it.
None of this depends on SWIFT.
There is no fundamental problem with transferring funds using some other secure messaging system.
This is currently used by a handful of international banks in Germany and Switzerland linked to Russian banks.
They could even use WhatsApp to instruct the necessary transactions.
Payments for Russianenergy exports, for example to Gazprom, are even less SWIFT-dependent.
None of this is to say that there will be no economic impact in ejecting Russian banks from SWIFT.
Russia has spent a decade preparing for the current war and any consequent economic sanctions.
It has invested hugely in its military alongside brutal repression of domestic political discussion to eliminate opposition to war.
Its military operations are not dependent on either external financing or external supplies.
Financial and economic pressures on the Russian economy are now mounting rapidly.
Other more targeted sanctions are hitting wealthy Russian individuals.
Wide-ranging economic sanctions on Russia may be needed for a lengthy period of time.
