Ukraine’s Foreign Minister Says West Discussing ‘Nuclear Option’ of Cutting Russia Off From SWIFT

Earlier this month, US media reported that Washington was mulling crushing new economic restrictions against Moscow, including cutting the country off from the SWIFT payment system, a ban on the purchase of Russian sovereign debt, and sanctions against Nord Stream 2, if Russia ‘invaded’ Ukraine. Moscow has dismissed having any plans to do so.

Western officials are actively discussing the prospect of cutting Russia off from SWIFT, and going through with it would be a big deal for Kiev, Ukrainian Foreign Minister Dmytro Kuleba has said.

“What I know from my informal conversations [with Western officials] is that they are discussing the nuclear option of disconnecting Russia from SWIFT. That would be huge,” Kuleba said, speaking to the Washington Post.

Calling on the US and its allies to ramp up their threats of sanctions against Russia, the diplomat said he would immediately express concerns if the Biden administration tried to reach a compromise with Moscow instead.

“If I see indicators that the United States is holding something up because they are not willing to irritate Russia, I will get immediately concerned because I think it’s a completely wrong and an ill-advised line to take,” he said. “This hasn’t been the case so far,” Kuleba added.

The foreign minister urged the US, the UK and the European Union to lay out clearly the steps they would take in the event of a Russian “invasion” of Ukraine, suggesting that a dearth of information might push the Kremlin to attack. “They’ll think we’re just ‘blah blah blah’,” Kuleba suggested. He added that the US and the UK should “act on their own” against Moscow if the Russian energy-dependent EU focuses on less severe restrictions.

Russian officials have said repeatedly that the country has no plans of any kind for any invasion of its western neighbour, accusing US and European officials and media of deliberately stirring up tensions and spreading fake news. Amid claims by the US and its allies that Russia has concentrated up to 100,000 troops on the border with Ukraine, Moscow has emphasized that it won’t be told where to station its forces on its own territory.

SWIFT-ly Heading for Trouble

After warnings by US Joe President during talks with Russian President Vladimir Putin last week that the US would “respond with strong economic and other measures…in the event of a military escalation,” Western media began speculating on what these measures might include. One option, according to reports, is cutting Russia off from SWIFT, the Belgium-based interbank money transfer system.

Observers are divided on the effectiveness of such a step, with people familiar with discussions taking place between the US and its European allies telling Bloomberg that cutting Russia off from the payment system would be “extremely problematic,” given its potential to disrupt global energy markets, and those related to other Russian exports. Europe’s dependence on Russia for about 40 percent of its natural gas is another “concern,” the sources said.

The Economist magazine expressed concerns about the dangers of cutting Russia off from the payment system, suggesting that it would prompt America’s adversaries to “rush to alternatives” hasten its financial decline. Even simply getting the banking cooperative to comply might be a hurdle, the magazine said, given SWIFT’s formal commitment to political neutrality and many European countries’ extensive business ties with Russia. Then there’s the matter of the estimated $350 billion EU-owned assets in Russia, plus the roughly $56 billion in liquidity held by Russian oligarchs and others parked in EU banks. The latter, The Economist warned, might spark a run on banks across the region if the funds were rapidly withdrawn.

Talk in the West about cutting Russia off from SWIFT began in 2014, when the Ukraine crisis was first started by a US and EU-backed coup d’etat in Kiev. Moscow responded by developing a domestic alternative known as SPFS – a Russian acronym for ‘System for Transfer of Financial messages’. SPFS already has several hundred institutions plugged into the system, among them about two dozen foreign banks.