Boris Johnson is pushing for governments to block Russian banks from using Swift, an international messaging system that is vital for transferring money.
The prime minister reiterated on Friday that the measure was an important way to strike back against Vladimir Putin as Russian tanks approached Kyiv.
What is Swift?
Swift stands for the Society for Worldwide Interbank Financial Telecommunication. Set up in 1973, it is a crucial part of the plumbing that facilitates flows of money around the world.
It is a secure messaging system that allows around 11,000 financial institutions to talk to each other and authorize payments. When a payment is sent from one bank to another, they receive a message via Swift before going ahead with the transaction. Around 40 million transactions are carried out using Swift each day.
It is operated as a co-operative by 2,000 member banks and is based in Belgium. Central banks including the Bank of England oversee the running of the co-operative.
Swift is a neutral organization that cannot issue its own sanctions. A decision to block Russian banks from using the system would need to be agreed upon by governments.
Would a ban from Swift hurt Russia?
Boris Johnson has put forward the case that excluding Russia from Swift would make life difficult for Mr Putin by preventing Russia from sending and receiving payments.
Speaking on BBC Radio 4’s Today programme, Defense Secretary Ben Wallace Wallace explained: “When you pay Russia for its gas, it probably goes through the Swift system, for example.
He added: “We want it switched off. Other countries do not. We only have so many options. We are going to work all day to try and get it (switched off for Russia).”
Are there ways round a Swift ban?
The boss of VTB, a large Russian bank, VTB, said recently he could use other channels for payments, such as phones, messaging apps or email.
China has its own system known as Cips which it hopes will become a widely used alternative to Swift.
There are also alternatives such as cryptocurrencies, and Russian banks would still be able to route payments via countries that have not imposed sanctions.
Why hasn’t a ban already been implemented?
Any exclusion of Russian banks from Swift would require international agreement and there are differing views on whether to go ahead with it.
Germany is resisting a ban and Bruno Le Maire, France’s finance minister, has said that the measure would only be used as a last resort.
US President Joe Biden is also understood to be hesitant. Washington believes that European nations that do business with Russia could also be damaged if Russian banks were barred from using Swift.
Russia is a big supplier of oil, gas and a number of other important commodities to Europe. Blocking payments could disrupt those supplies and push prices up further.
Agreement on such a measure has happened before. In 2012, the EU barred Swift from serving Iranian firms and individuals sanctioned in relation to Tehran’s nuclear programme.
UK Defense Secretary Ben Wallace said: “Like so many things, these are international organisations, and if not every country wants them to be thrown out of the Swift system, it becomes difficult.”