A coalition of NATO-aligned countries has committed to new measures meant to sever Russia from the global financial system, countries announced in a joint letter today. The letter, signed by the United States, UK, Canada, and European allies, lays out new measures to isolate Russia’s central bank, and announces a new trans-Atlantic task force to freeze the foreign assets of sanctioned individuals.

In a dramatic escalation, the order also blocks select Russian banks from using SWIFT — the international payment system employed by banks to send money around the world.

SWIFT, which stands for The Society for Worldwide Interbank Financial Telecommunication, is a cooperative company based in Belgium, whose owners include many of Europe’s largest banks. The organization’s eponymous payments network does not actually exchange money but is used to authenticate payment instructions between banks. Its services are used to process some 42 million exchanges in more than 200 countries each day.

Exactly what effects expulsion from SWIFT will have on the political and military situation in Ukraine are difficult to predict, but the move will certainly be painful for Russian banks and markets, which have already been targeted by various financial sanctions.

A comment article from the Carnegie Moscow Center think tank in 2021 described expulsion from SWIFT as a “nuclear option” that would hit Russia particularly hard, primarily because of the country’s reliance on energy exports denominated in US dollars. “The cutoff would terminate all international transactions, trigger currency volatility, and cause massive capital outflows,” wrote the author, Maria Shagina.

Notably, the order does not institute a total ban on Russian access to SWIFT, but commits to “ensuring that selected Russian banks are removed from the SWIFT messaging system.”

When Iran was ejected from SWIFT in 2012 — the first time any country had been kicked off the network — it destroyed almost half the value of the country’s oil sector, reducing annual exports from $92.5 billion to $52 billion. Iranian banks were reconnected to SWIFT in 2016.

However, Russia has also been preparing for this eventuality for years. Expulsion from SWIFT was first suggested in 2014 in response to the country’s incursions in Ukraine’s Donbas region, and that year, Russia set up its own domestic alternative to SWIFT, the System for Transfer of Financial Messages, or SPFS. China also operates a rival system named Cross-Border Interbank Payment System, or CIPS. Neither have the support or international acceptance of SWIFT but could provide alternatives in the long run.