SWIFT & Sanctions

Modern blockades are administrative — a list of accounts, a few signatures.

The brief

A country can be put under siege by a few signatures on a list of accounts. The Society for Worldwide Interbank Financial Telecommunication — SWIFT — is a Belgian cooperative, founded in 1973 and based near Brussels, that runs the messaging system through which most of the world's banks send each other instructions to move money. More than 11,000 financial institutions in over 200 countries exchange tens of millions of standardized messages a day across it. SWIFT moves no money itself; it moves the orders. But without it you cannot easily make a cross-border payment in dollars, euros, yen, or pounds. Cutting a country off from SWIFT is the closest analogue, in the 21st century, to surrounding it with a navy — except no ships sail, no shots are fired, and the blockade is executed entirely on paper.

The United States — and, more reluctantly, the European Union — has since roughly 2010 weaponized the dollar-clearing system as a coercive instrument. The mechanism is not SWIFT itself but the dollar: any bank, anywhere, that wants access to US dollars must clear through New York correspondent banks, and so must obey US sanctions or be shut out of the world's most important currency. Iran was the test case, expelled from SWIFT in 2012 and again in 2018; Russia, after 2022, was the dramatic application, with major banks cut off and half its central-bank reserves frozen; Chinese firms have been threatened repeatedly with secondary sanctions. The system is extraordinarily effective in the short term. It is also visibly accelerating efforts by China, Russia, India, and others to build alternative settlement layers — China's CIPS, gold-backed and rupee-rouble trades, BRICS financial infrastructure, central-bank digital currencies. Each use of the sanctions weapon, by demonstrating that access can be revoked, creates another incentive to reduce reliance on it.

Why nowWhen the West expelled major Russian banks from SWIFT in 2022, the rouble briefly cratered — and then the workarounds began. By the mid-2020s China's CIPS, its home-grown clearing network, was processing record volumes and adding direct participants; central banks were buying gold at the fastest pace in decades to hold reserves outside Western reach; and cross-border digital-currency projects like mBridge had moved from slideware to pilot transactions using real value. None of this yet rivals the dollar, which remains central to global trade and finance. But each new sanction is also an advertisement for the exits. The single most under-priced strategic risk in current Western financial architecture is whether the dollar system can sustain its weaponization at the current pace without midwifing a credible alternative. The 2030s may be the decade in which we find out — and 'finding out' could mean a world split into two payment blocs that no longer fully clear through each other.