Kremlin: Russia is preparing to be disconnected from SWIFT (opens in new tab)

SWIFT is essentially a system for structured authenticated bank-to-bank messages in which pretty much every worldwide financial institution participates - in some ways a glorified email (though with structured fields), but with sufficient security assurances that if you get a message claiming to be from the First Bank of Nigeria (FBNINGLA) "pls do XYZ with USD 100 million kthxbye" then you would actually consider it to be sufficient authorization to execute that request. You still might wait until actually getting that money from them though before passing it on, counterparty risk is a thing, but you can assume that it's actually from them and whoever is sending has the authority to act on their behalf for huge amounts of money.

If Russian institutions can't participate, it means a disconnection for the majority of international financial communications, preventing Russian banks from directly interfacing with all the thousands of banks worldwide - they will have to establish a bilateral communications protocol with some specific partners/correspondent banks (perhaps they have something arranged already) and have someone else handle the international transactions on their behalf. That's not totally devastating, but a pain in the butt, extra expenses, extra delays and extra risk for all those transactions.

Russia has also been working on a plan to run their internet disconnected from the global Internet if necessary. It sounds like they are anticipating various actions that would cause international sanctions and preparing ways to survive them.

SWIFT disconnection is discussed alongside with oil embargo and freezing a ~$1T on the US/EU accounts of Russian elite. Taken for the face value it's pretty significant; however given the history of West generally letting Russian government doing whatever, the stakes could appear to be lower.

Its significant because the US has a virtual monopoly over global banking with the SWIFT system, which is used to impose sanctions and punish our perceived geopolitical foes. The use of the SWIFT system as a cudgel has led other countries to develop their own, competing SWIFT-like systems that would not be controlled by the US. Russia, China and India have been signaling their future adoption of this system for several years.

https://finance.yahoo.com/news/china-russia-india-push-forwa...

So replace a system used by all banks in all countries with a system used by no banks in any country?

That’s like having your car engine break down and replacing it with a chair. Sure, you could do that, but what would be the purpose?