WASHINGTON (BLOOMBERG, REUTERS) - The US is seriously considering whether to seek Russia's expulsion from the SWIFT financial messaging system over the Ukraine invasion as allies in Europe warm to the idea of imposing a penalty that seemed unlikely just days ago, according to people familiar with the matter.
Biden administration officials are now debating whether to push for a directive from the European Union needed to ban Russia from SWIFT, though a US and EU decision is not imminent, according to the people.
Officials are discussing the matter with the Federal Reserve, which sits on SWIFT's oversight body, two of the people said. Another person said talks have commenced with the European Commission.
A French presidential official said on Saturday (Feb 26) discussions among EU are close to reaching a successful conclusion. The official, who was speaking on condition of anonymity, said that no EU member state was blocking Russia’s exclusion from the system, but that the talks were still ongoing.
The discussions by the US mark a change in course after President Joe Biden said he was holding off because European allies had voiced concerns over the risk such a move posed to their economies.
But as Russian President Vladimir Putin continues a full-scale invasion of Ukraine that's now advancing on Kyiv, officials in the US and Europe are seeking tougher consequences against Moscow on top of the sanctions they've already unveiled.
All of the people discussed the matter on condition of anonymity to describe private deliberations. The US National Security Council press office and Fed spokeswoman Michelle Smith declined to comment.
The chances of a move on SWIFT have been a moving target, and the likelihood remains unclear. While previously a faint prospect, the measure has grown more likely in the past few days, the people said, fuelling the belief that it now could happen, though they stopped short of predicting it would.
Western leaders, wary of sending troops into Ukraine, have so far avoided denying access to SWIFT. However, Britain, Canada and the Netherlands are now publicly advocating for it, while Democratic and Republican lawmakers in Washington have escalated their calls in recent days for expelling Russia.
Dutch Prime Minister Mark Rutte said on Friday (Feb 25) that the Netherlands supports barring Russia. The EU "took a big step forward concerning SWIFT", he said at a press briefing in The Hague. "We drew a clear picture based on a proposal from the French on what the pros and cons are to make sure we can decide to add it at a later stage."
Britain has been on the record saying it wants to take action on this. British Defence Secretary Ben Wallace told the BBC on Friday that "we'd like to do the SWIFT system". He was also clear there were still some holdouts: "These are international organisations and if not every country wants them to be thrown out of the SWIFT system, it becomes difficult."
At SWIFT, the management is growing less resistant to the idea of banning Russia, but the discussions are still ongoing, two of the people involved in deliberations said. A representative for SWIFT, which is based in Belgium, couldn't be reached outside of normal business hours.
The US does not have the power to unilaterally block Russia from SWIFT. The organisation will only sever access if the EU passed sanctions against the targeted entity or country.
In the 27-nation EU, decisions of this magnitude require unanimity. Even if the tide appears to be turning in favour of a SWIFT expulsion - or indeed if the West wants to firmly signal that it really is under serious consideration - key nations still remain on the fence.
German spokesman Steffen Hebestreit earlier in the day said suspending Russia from SWIFT would be technically difficult and that Italy also had concerns.
SWIFT - which stands for the Society for Worldwide Interbank Financial Telecommunication - is overseen by the National Bank of Belgium and central bank representatives from the US, Britain, EU, Japan, Russia, China and others. It delivers secure messages among more than 11,000 financial institutions and companies, in over 200 countries and territories.
SWIFT has blocked access to a nation just once in its history: In 2012, with the help of an EU directive, it blocked Iran as part of a range of measures aimed at containing the Islamic Republic's nuclear programme.
Wall Street banks have pushed back against making a similar move against Russia, arguing that it would trigger higher inflation, push Russia closer to China and potentially shield suspect financial transactions from scrutiny by the West.
Opponents also warn that blocking Russia from the global payments system risks encouraging the development of a SWIFT alternative that could eventually undermine the supremacy of the US dollar.
"Removing Russia from SWIFT is a significant step but no magic bullet," said Josh Lipsky, director of the Atlantic Council's GeoEconomics Centre.
"There are still alternative ways for Russian banks to operate so it's important to keep focused on the money, not the messaging system."