SWIFT: Russian Disconnection

This Belgian cooperative society is an intermediary and executor of financial transactions between banks. 

It is commonly called SWIFT as opposed to its legal S.W.I.F.T. SCRL which stands for Society for Worldwide Interbank Financial Telecommunication.  It just sends secure interbank communications rather than transfer of funds. The proposed sanctions would cut Russia off from the global electronic-payment-messaging system and can be likened to the financial equivalent of the nuclear bomb. There is a precedence to what Biden is proposing with Russia. Following blacklisting by the EU and amid pressure from the US, SWIFT disconnected Iranian banks in 2012. However, the overall impact was muted, as Iran was largely isolated from the global financial network beforehand.

While this move could cause temporary major economic pain for Russia, it is a tad overhyped.The US might not have any leverage in the matter for:

• SWIFT adheres to Belgian and European law Not U.S. law

However, the US lives by the adage "Might is Right". It is not beyond them to weaponize the strength of the US$ and threaten sanctions against the platform itself as in the Iran case.Theoretically, Russia would face significant economic disruption for a period of time, especially with respect to cross-border payments, as it adjusts to new platforms. It could cause the Russian economy to contract and send the ruble tumbling in the short term

• However, this is a double edged sword since Russia's leading exports -- oil and natural gas -- are critical to Europe's livelihood. In the hurry to hurt Russia, Europe itself might end up hurt. 

• The US  and Germany have the most to lose if Russia is disconnected, because their banks are the most frequent SWIFT users to communicate with Russian banks.
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• The impact would also be muted because Russia has been building its own financial-messaging system.

Read: Russia does not fear SWIFT disconnect