Golden passports and SWIFT, Labour ministers stick to EU line on Russia sanctions

Removing access to the financial messaging service SWIFT would the most severe penalty for Russia – the potential “nuclear option” in the world of sanctions. If Russia is kicked off SWIFT, it would be severed from much of the global financial system.

But it could also have unwanted consequences, chiefly by compromising energy exports to Europe. And it is for this reason that EU member states are not fully in synch with this option.

Earlier today, MaltaToday asked finance minister Clyde Caruana at a Labour Party press conference if he agrees with the option to remove Russia from SWIFT. Stopping from giving any opinon on the matter, Caruana only said that Malta would be fully in step with EU sanctions against Russia.

On her part, energy minister Miriam Dalli responded to a question from MaltaToday as to whether the island should stop selling its €1 million golden passport to Russian elites, by proferring a non-answer on the specific matter: “We will be fully in step with EU sanctions.”

Europe’s unwillingness to cut Russia from SWIFT underlines the cost of what such a sanction would mean for European companies and governments.

German Chancellor Olaf Scholz of Germany, which has the biggest trade relations with Russia, has opposed the move. And while United States President Joe Biden said the US and Europe were united in their efforts to confront Russian aggression with aggressive sanctions, he suggested disagreement on barring SWIFT payments.

It’s not a clear-cut option, in spite of encouragement from European Parliament President Roberta Metsola, who said “further massive, sanctions, with nothing off the table, are important – we can do more. Including the exclusion of Russia from the SWIFT system.”

Prime Minister Mark Rutte of the Netherlands, who has taken one of the hardest lines in the EU on imposing sanctions on Russia, said that he and others had been pushing for SWIFT to be included. “Many colleagues pleaded for SWIFT,” he said, adding, “But we agreed more work needs to be done to assess what it means if Russia is cut off from SWIFT.”

French finance minister Bruno Le Maire said the option of cutting off Russia from SWIFT remained open, but that he viewed this only as a last resort. 

Polish Prime Minister Mateusz Morawiecki admitted after the Council summit: “Many leaders share the view that Russia needs to be excluded from the SWIFT system, but unanimity is needed to pass the sanctions.”

SWIFT is a Belgian messaging service, formally known as the Society for Worldwide Interbank Financial Telecommunications, that connects over 11,000 financial institutions around the world. Created in 1973 by 239 banks from 15 countries to handle cross-border payments, it does not hold or transfer funds, but allows banks to alert one another of transactions that are about to take place.

Severing Russia from SWIFT would instantly raise costs on energy, wheat and other commodities, and that explains EU member states’ unwillingness to go forward on this option.

Without SWIFT, Russia would be unable to carry out international financial transactions, forcing importers, exporters and banks to find new ways to transmit payment instructions. International profits from oil and gas production make up more than 40% of Russia’s revenue.

Europe heavily relies on Russian energy exports, so kicking Russia out of SWIFT would make business more costly and complicated.

Even in 2018, Europe disagreed with the Trump administration on cutting Iran’s access to SWIFT. Ultimately, it was SWIFT that cut ties to Iranian banks out of fear of being in violation of sanctions against that country.

Additionally without SWIFT, Russia could be pushed further into forging stronger ties with China or even developing a digital currency – bad incentives for Russian geopolitical ambitions.

Ukrainian foreign minister Dmytro Kuleba has made a heartfelt online appeal for Russia to be excluded from SWIFT, declaring that “everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too.”

And former European Council President Donald Tusk accused EU governments of having “disgraced themselves” by refusing to impose the toughest possible sanctions on Russia. “In this war everything is real: Putin’s madness and cruelty, Ukrainian victims, bombs falling on Kyiv,” Tusk posted on Twitter. “Only your sanctions are pretended [sic]. Those EU governments which blocked tough decisions (i.a. Germany, Hungary, Italy) have disgraced themselves.”