Russia backs global use of its alternative SWIFT system

MOSCOW – Reuters

Russian lawmakers on March 19 backed the international use of a Russian alternative system for the global financial messaging network SWIFT designed by Moscow to eliminate the risk of Western sanctions.

Russia has held talks with China, India, Iran and Turkey about joint use of Russia’s financial messaging system, said Anatoly Aksakov, who heads the Russian Banking Association and a financial committee with the lower house of parliament.

“As the system has proved to be viable and efficient, it draws interest from both Russian and foreign players, it is proposed to give any legal entities, Russian and foreign, the possibility to use it,” Aksakov said.

The lower house of parliament, or Duma, gave the green light to a bill proposed by Aksakov in the first reading. The bill needs to pass two more readings with the Duma and obtain support from President Vladimir Putin to become law.

Russia started developing an alternative to the Belgium-based SWIFT financial messaging service in 2014 after a shock caused by the first round of Western sanctions against Moscow which were designed to punish it for the annexation of Crimea and its role in the Ukrainian crisis.

Amid escalating geopolitical tensions, Russia feared being cut from the global financial system as happened with Iran in 2012.

SWIFT disconnected some Iranian banks again in November last year, saying the step was taken “in the interest of the stability and integrity of the wider global financial system”.

Central Bank Governor Elvira Nabiullina said last year that Russia had created a system that could replace SWIFT and “nullify” risks of Russia being cut from the global network.

Aksakov told the Duma on March 19 that more than 400 companies, most of which are Russian, have become members of the SWIFT substitute system.

“It obviously allows us to solve issues related to the sanctions pressure,” Aksakov said.

SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, was founded in 1973 and connects more than 11,000 institutions in over 200 countries and territories, it said on its website.

Moscow has also seen interest in joining the Russia-based system from Arab countries and is ready to start negotiations about creating a switch that would connect the Russian system with the European one, Aksakov said.

The central bank was not available for comment as it continues a “week of silence” ahead of its board meeting on March 22 at which it is widely expected to keep its key interest rate on hold at 7.75 percent.