When Russian banks were cut off from the SWIFT messaging system in 2022, the move was seen as one of the strongest financial sanctions imposed after the invasion of Ukraine.
Authors
- Mesbah Sharaf
Professor of Economics, University of Alberta
- Abdelhalem Shahen
Associate professor, Imam Muhammad ibn Saud Islamic University
The measure, taken by the European Union and its allies, targeted major Russian banks and aimed to disrupt the country's ability to conduct international transactions.
SWIFT - the Society for Worldwide Interbank Financial Telecommunication - allows more than 11,000 financial institutions in over 200 countries to send secure, standardized payment instructions to one another. Without it, cross-border transactions become slower, more difficult and more expensive.
But what happens if a country is pushed out of the world's main financial messaging network? Can it simply build an alternative? Our recent research suggests the answer is no - or at least not nearly as easily as some claims suggest.
Russia's workaround
Russia had been preparing for the risk of being cut off from global financial infrastructure for years. After earlier sanctions in 2014, it developed its own domestic system, known as the System for Transfer of Financial Messages (SPFS) , to reduce its reliance on foreign financial infrastructure and make itself less vulnerable to future sanctions.
While SPFS was built mainly for the Russian market, the Bank of Russia says foreign users can also connect either directly or through a service bureau. This suggests an effort to extend its use beyond Russia, even if its international reach has remained limited.
When Russian banks were cut off from SWIFT in 2022, SPFS was presented as part of that fallback strategy. Other workarounds included capital controls, rules requiring exporters to sell part of their foreign-currency earnings and greater reliance on domestic payments infrastructure such as Mir .
At first glance, the strategy appeared to work. Russian exports remained high in the months after the sanctions, leading some observers to argue that the shock had been contained and that financial workarounds were doing their job. The Financial Times, for example, noted the surprising resilience of the Russian economy .
But our findings point to a more complicated reality.
What the data shows
Using monthly data from March 2020 to February 2024, we examined what happened to two key indicators after Russia's exclusion from SWIFT: merchandise exports and international reserves.
The results showed a clear split between trade and finance. Export revenues stayed high for a time, but much of that was tied to the global surge in oil prices rather than to the strength of SPFS itself. Once oil prices were taken into account, the apparent export resilience became much weaker.
In other words, Russia benefited from unusually favourable market conditions. High energy prices helped keep export earnings afloat at exactly the moment when the country was facing major financial disruption. That is not the same thing as showing that a domestic payment system had replaced the role SWIFT normally plays in international finance.
The deeper strain showed up in Russia's international reserves. Reserves are one of the clearest signs of a country's external financial strength. They support currency stability, underpin investor confidence and provide a buffer against economic shocks.
Russia's reserves fell sharply and stayed under pressure after the SWIFT exclusion, suggesting the financial damage ran deeper than the export numbers alone might imply.
Alternatives to SWIFT have limits
This helps explain why alternatives like SPFS have limits. A domestic system may help preserve some continuity and allow certain transactions to keep moving inside the country or with a limited group of foreign partners.
But it does not automatically recreate the wider ecosystem that makes SWIFT powerful : global reach, liquidity, institutional trust and the network effects that come from being used almost everywhere.
The more institutions that use a system, the more valuable it becomes. Replicating that scale requires broad international participation and confidence, which are difficult to build quickly.
The future of global payments
Around the world, governments are paying much closer attention to financial sovereignty, sanctions risk and dependence on payment systems they do not control.
Countries such as Russia and China have tried to build alternatives, and debates about payment fragmentation are becoming more common .
In simple terms, payment fragmentation means the global financial system breaking into separate networks that do not fully connect with each other, making cross-border transactions more complex, costly and less predictable.
Yet building a domestic alternative is not the same as reproducing a global network built on decades of legal standards, co-ordination and trust.
Sanctions are still effective
The broader lesson is that payment technologies derive their value not simply from their design , but from who uses them, how widely they are accepted and whether people trust them in practice.
That is why Russia's experience should be interpreted carefully. It does not demonstrate that countries can easily escape the economic force of sanctions by building local substitutes.
Instead, it shows that while some adjustment is possible - especially when helped by high commodity prices - the advantages of a global network are much harder to replace.
So can countries build alternatives to SWIFT? Yes.
Can they quickly build alternatives with the same reach, trust and financial weight? Russia's experience shows that while a country may be able to keep some payments moving for a time, that is very different from preserving full financial resilience.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
