Weaponisation of SWIFT and the response of Russia, China and BRICS

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a global messaging network that enables secure and efficient international money and securities transfers. Founded in 1973 as a faster and reliable alternative to the telex system, SWIFT now connects more than 11,000 financial institutions worldwide. Beyond banking, SWIFT has been weaponised as a critical tool in enforcing sanctions against Iran and Russia.

The global economy is so tightly interconnected that states can exploit mutual dependence as leverage against one another.

According to Farrell and Newman, this is the capacity for a state to be “so central to an embedded network of interdependence that it can impose its will on others” and the ability to choke and deny resources.

In February 2022, in response to Russia’s Invasion of Ukraine, the US, the European Union, the UK and their allies soon imposed sanctions by excluding Russia’s largest financial institutions from the SWIFT network. This resulted in effectively preventing Russia’s ability to conduct international trade in American dollars and Euros. In February-March 2022, the US, the European Union, and their allies froze more than $300 billion foreign exchange assets belonging to the Russian Central Bank.

After Nicolas Maduro assumed the presidency of Venezuela, the US policy brought overt pressure followed by sanctions targeting financial institutions and its oil exports resulting in economic strangulation and preventing the country’s access to global banking channels and international credit markets. Even though Maduro won the May 2018 Presidential election, he was captured on January 3 of this year by US Special Forces and charged with narco terrorism, cocaine importation and firearm offences.

The real reason appears to be the growing share of Venezuelan oil exports to China between 2010 and early 2020 and settling the payments in Yuan or through Chinese banks operating outside the SWIFT reflecting a gradual shift from transactions in US Dollars in bilateral energy trade. Apart from changing the regime in January 2019, the US and its allies recognized opposition leader Juan Guaido as Venezuela’s interim president. The Bank of England froze approximately 31 tonnes of Venezuelan gold valued at $ two billion, which was its inviolable sovereign asset. The custodial neutrality which has long been recognized in the International Reserve System, was violated.

Confronted with unprecedented economic sanctions following the cutoff from SWIFT and freezing of sovereign reserves, Russia responded with calibrated counter measures. In March 2022, Russia introduced “Ruble-for-Gas” payments in yuan, rupees and dirhams. Consequently, the bilateral trade in local currencies surged with India, China, Turkey and Iran.

A year later, Russia introduced SPFS (System for Transfer of Financial Messages), an electronic communication system devised by the Central Bank of Russia as an alternative to SWIFT. The architecture of SPFS was almost identical to SWIFT, ensuring reliable and secure exchange of messages relating to financial transactions. This was Russia’s endeavor to fortify its financial infrastructure against external vulnerabilities and enhance its sovereign capability in settling cross border transactions, within Russia and participating foreign entities in 20 countries.

23 foreign banks were connected to the SPFS by the third quarter of 2023. Additionally, 70 foreign financial organisations from 12 countries joined the SPFS as finance hubs, according to Russia’s Central Bank Governor, Elvira Nabiullina. Through SPFS, Russia tried to help its financial sector to adapt to unprecedented Western sanctions after cutting off from SWIFT.

Counter measures were also taken by China by introducing CIPS (Cross-Border Interbank Payment System) in 2015, as a strategy to internationalize the Yuan and reduce reliance on SWIFT and the US dollar in global trade and finance. This is not only an alternative messaging system for financial transactions but also to enhance the role of Yuan in the global financial system, thus challenging the dominance of the US dollar. CIPS aims to provide a secure, standardized, and efficient mechanism for facilitating cross-border yuan transactions and settlements.

CIPS supports China’s broader goal of promoting yuan for global trade and investment, since it provides a direct platform for international Yuan transactions. CIPS has seen significant growth in both transaction volumes and international participation. By processing around 80 trillion-yuan transactions in a single year and with approximately 1,280 financial institutions from 103 countries and regions connected to the system, CIPS demonstrated the increasing global acceptance of the Yuan.

The involvement of several foreign banks as shareholders and participants in CIPS underlines the system’s international reach and confidence in its role in global finance. Despite its advancements, CIPS is not entirely independent of the existing global financial communication infrastructure. Yuan’s share in global payments and settlements remain relatively small compared to the US dollar, reflecting the challenges in persuading international entities to shift away from SWIFT and the dominant global currency.

CIPS represents a significant step in China’s long-term strategy to enhance the global standing of the Yuan and reduce its financial system’s dependence on Western-centric mechanisms like SWIFT and the US dollar.

While it currently operates alongside SWIFT and within the constraints of a dollar-dominated world, CIPS’s continued expansion and the growing international use of the Yuan, signals China’s rising influence in global finance.

Under India’s 2026 chairmanship, BRICS objectives revolved around “Resilience, Innovation, Cooperation and Sustainability,” with economic resilience, development finance, and trade facilitation listed as its core pillars. BRICS is seeking to widen the use of local currencies, strengthen financial and payment infrastructure and expand institutional tools such as the New Development Bank.

BRICS is trying to build a less dollar-dependent ecosystem for its members. Its official position appears to be an effort to increase the use of local currencies in trade and financial settlements, improve payment interoperability, and reduce exposure to exchange-rate risk. It can imply trade settlement in local currencies, where imports and exports are invoiced and paid without using the dollar.

It can mean local-currency financing, where loans, bonds, and infrastructure financing are denominated in domestic currencies. It can refer to institutional and infrastructural changes, such as payment systems, clearing arrangements, and settlement platforms that reduce dependence on dollar-based channels.

A much more ambitious meaning is reserve de-dollarisation, where central banks materially reduce their reliance on the dollar as a reserve asset. The 2025 BRICS Finance Ministers and Central Bank Governors’ joint statement welcomed the “Technical Report: BRICS Cross-border Payments System” and noted that it should support efforts to facilitate “fast, low-cost, more accessible, efficient, transparent, and safe cross-border payments” among BRICS countries and other nations.

A major analytical error in many discussions of BRICS de-dollarisation is to combine local-currency trade settlement gradually through bilateral or plurilateral arrangements, where trade volumes are large and payment channels are developed efficiently.

Ironically, none of the official BRICS statements suggest that replacing the dollar as the leading reserve is imminent. Instead, they point to a more incremental vision: increasing the share of transactions that can be settled outside the dollar if doing so is commercially and institutionally viable.

Moving forward, states must consider resilience, alignment, diversified interdependence, and possibly deterrent strategies. International order does not hinge on free markets; it hinges on how nations react to weaponized finance or weaponised dependence, such as energy, critical minerals, chips and technological inputs.

(The writer is a former member of CBIC and DG, DRI)

ABOUT THE AUTHOR

BV Kumar

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