U.S. assesses Russian retaliation potential should it be cut from SWIFT -senator

[January 21, 2022]  By Timothy Gardner

WASHINGTON (Reuters) - The United States is analyzing what damage could be done by Russia to Western allies, such as halting oil and gas exports, if the Biden administration cuts Moscow out of the SWIFT financial system should it re-invade Ukraine, a U.S. senator said on Thursday.

Russia has massed about 100,000 troops around its border with Ukraine in what Kyiv believes could be preparations for a military offensive. Russia invaded and annexed the Crimea peninsula from Ukraine in 2014.

"I think the administration is still doing an analysis of what the collateral damage would be to kicking Russia out of the SWIFT system, both for its impact on the United States and on our European allies," Senator Jeanne Shaheen, a Democrat who co-led a bipartisan delegation of senators to Ukraine this week, told reporters. The delegation met with Ukrainian officials and then briefed President Joe Biden about the trip.

When asked about Shaheen's comments on SWIFT, a spokesperson for the White House's National Security Council (NSC) said: "Assessing potential spillovers and exploring ways to reduce those spillovers is good governance and standard practice."
 

No option is off the table as Washington looks at ways to deliver severe costs to the Russian economy should it invade Ukraine, U.S. officials have said.

Disconnecting Russia from SWIFT, which allows banks to communicate with each other on global transactions, is one of the harshest measures the United States could take against Russia. SWIFT stands for Society for Worldwide Interbank Financial Telecommunications.

Sen. Jeanne Shaheen (D-NH) speaks during a hearing of the Senate Foreign Relations to examine U.S.-Russia policy, on Capitol Hill, Washington, U.S. December 7, 2021. Alex Brandon/Pool via REUTERS/File Photo

But Russia could take counter measures such as cutting oil and gas exports, putting Western investments at risk in Russia, or using internal alternatives to SWIFT that could become more efficient over time.

And sanctioning Russia's access to SWIFT is "a bit of a third rail" for some European countries especially during its energy crisis, said Adam M. Smith, a former U.S. Treasury Department official.

Some countries would like the Belgium-based organization to serve as a utility free from political influence. German government officials told Handelsblatt newspaper this week that Western governments are no longer considering cutting Russia's access to SWIFT. A NSC spokesperson rejected the story.

U.S. senators are working on legislation to aid Ukraine after a bill by Senator Ted Cruz, a Republican, failed last week. A bill led by Robert Menendez, a Democrat, does not mention SWIFT by name, but targets parties that facilitate access to such systems. Several Republicans have said they want sanctions on Russia's access to SWIFT to be included.

Shaheen said Washington needed "to look at what all of the potential ramifications might be of whatever action we take."

"Energy is one of those and thinking about how we can help shore up any countries that will have their energy, oil and gas shut off because of Russian action, I think is very important," Shaheen said.

Biden's top energy diplomat, Amos Hochstein, has held discussions with global energy companies on contingency plans for supplying natural gas to Europe if conflict between Russia and Ukraine disrupts Russian supplies.

(Reporting by Timothy Gardner; editing by Grant McCool)

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