Bad news for Putin and Russia on SWIFT banking system

As recently as yesterday, Germany and Italy were both reportedly hesitant to remove Russia from the SWIFT banking system. Because the major players need to be on board for a move like this to be effective, there wasn’t really a path for the United States and others to move forward without them. This morning we said that getting Germany and Italy on board would be a major accomplishment for President Biden if he could pull it off.

It’s never entirely clear what all goes on behind the scenes that leads to these kinds of changes of heart, but as of now, Germany and Italy are now both reportedly ready to remove Russia from the SWIFT banking system. The government of Ukraine announced that Italy is on board, while Germany itself announced that it’s open to the move.

This doesn’t necessarily mean it’ll happen. Removing Russia from the SWIFT banking system is seen as a metaphorical “nuclear weapon” in the eyes of the French government, for instance. But as with actual nuclear weapons, the mere threat of removing a nation from SWIFT can be an effective tool. For that threat to be credible, Germany and Italy had to publicly state that they were open to it. Now that they have, it gives the world a huge piece of leverage over Putin.

This still doesn’t mean that Putin will back down. His actions make clear that either he’s lost his mind, or he strategically wants the world to believe he’s lost his mind. If it’s the former, no amount of consequences will bring him back to rationality. But losing access to SWIFT (or even the credible threat of being cut off from SWIFT) could be enough to convince the Russian oligarchs that letting Putin run wild would simply be too expensive for them. In such case they could collectively demand that Putin back down, or if he’s no longer even willing to listen to them, oust him from power.