The EU, US, Britain and other allies have agreed to ban a number of Russian banks from using the Swift global payments system.
Britain had been pressing for action on Swift for some time but both Germany and Italy - which are both heavily reliant on Russian oil and gas imports - were said to be reluctant.
However, in a co-ordinated move, Britain, the US, Canada and the European Union have now taken action as the conflict in Ukraine escalates.
Russia is reliant on the payment system for its oil and gas exports.
The White House said that the action taken will mean that the country will have to rely on "the telephone or a fax machine" to make payments.
The new package of sanctions are the harshest imposed on Russia to date and aim to impose “restrictive measures” to prevent the Russian Central Bank from deploying its international reserves.
Boris Johnson said the West is “tightening the economic ligature” around Vladimir Putin’s Russia.
But what exactly is Swift? And what effect will the ban have on Russia?
Here is everything you need to know about it.
What is Swift?
To give it its full name, the Society for Worldwide Interbank Financial Telecommunication is a messaging system for banks which works by linking up banks using standardised codes for payments.
The system does not facilitate payments, rather it sends payment orders which must be settled by the corresponding accounts, and transports financial messages in a secure manner.
Despite the system being criticised for its inefficiency, it is widely used around the world - in 2015, Swift linked more than 11,000 financial institutions in over 200 countries who were exchanging over 32 million financial messages per day.
Founded in 1973, Swift is headquartered in Belgium and owned by its member financial institutions, making it a “cooperative society” under Belgian law.
What could the ban mean for Russia?
Banning some Russian banks from Swift is a major blow to the country – Conservative MP Jonathan Djanogly said that it would effectively return Russia to “the economic dark ages”.
In theory, it would mean that Russia’s financial institutions would find it much harder to move and trade money with other countries, as they would no longer have access to Swift’s standardised format.
If you’ve ever tried sending money to a friend or relative in another country, you can understand the pain.
The first deputy chairman of the Russian State Duma’s committee on international affairs has said that banning the country from Swift would be a “serious” matter.
Speaking to BBC Radio 4’s PM programme, Vyacheslav Nikonov called Boris Johnson’s first round of sanctions against Russia “a laughable affair,” saying they would have “zero” effect.
“We expected something more serious,” he added, “like switching from… Swift.”
Why was there opposition to the Swift ban?
Bans from the Swift system have been floated in sanctions discussions in the past.
In 2014, the UK planned to press the EU to block Russian use of Swift as a sanction in response to Russian military intervention in Ukraine.
But Swift refused to disconnect Russian banks from its network.
The current escalation of tensions between Ukraine and Russian is of a much higher profile, and with international condemnation of events even more widespread, it would be something of a PR disaster were Swift to refuse such measures again.
For as widespread as that condemnation is though, there has been some objection to banning Russia from the network from certain countries.
Earlier in 2022, when possible sanctions in case of an invasion that had not yet happened were being deliberated, US and European officials said banning Russia from the financial system was not being considered.
Sources familiar with the talks told Reuters that banning Russia entirely was not under active consideration after running into major objections from European countries.
European lenders have expressed concern that banning Russia from Swift would mean that billions of dollars of outstanding loans they have in Russia would not be repaid.
Of course, those talks were happening when invasion was just a threat. Now it has actually happened, the landscape looks much different.
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