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What is SWIFT and how removing Russia can impact the Russian Economy and what can be Putin's counter ?

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SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is a global messaging system connecting thousands of financial institutions around the world.

SWIFT was formed in 1973 and it is headquartered in Belgium. It connects more than 11,000 financial institutions in more than 200 countries and territories worldwide so banks can be informed about transactions.

Barring Russia from SWIFT would not only damage the country’s economy but in the long term, cut Russia off from a swath of international financial transactions. That includes international profits from oil and gas production, which make up more than 40% of Russia’s revenue.

While Russian banks could use alternative messaging systems such as phones, messaging apps or email to make payments via banks in countries that have not imposed sanctions, they are likely to be less efficient and secure, transaction volumes could fall and cost debt-to-GDP present, Russia has a massive amount of forex reserves and its debt-to-GDP ratio is only around 10 percent. In comparison, the US has a debt-to-GDP ratio of nearly 130 percent. Not to forget, Russia has become a big oil and gas supplier.

Among other things, Russia also came up with an alternative to SWIFT. The country developed SPFS -- the financial messaging system of the Bank of Russia. Currently, SPFS has 400 users and the system handles about a fifth of domestic payments. In a statement on SPFS, Russia's central bank said, “This is a reliable and secure channel for sending electronic messages on financial transactions."

It will interesting to see if Russia will be removed from SWIFT and if it is then how efficient the Russian counter would be.

Connect with author on Twitter - @SsoulImmortal

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