The US and some of its allies including the European Commission, France and Germany have moved to exclude Russia from the SWIFT messaging system in support of Ukraine, the latest White House announcement revealed, a move which, if implemented, would hamper Russia’s overseas trade but will not form a fatal impact on its economy as the country could still turn to a number of other means to support its international economic activities, experts said.
According to the aforementioned statement, the US, European Commission, France, Germany, Italy, the UK and Canada would take measures to ensure that “selected Russian banks” are removed from the SWIFT interbank messaging system, which means that those banks will be effectively disconnected from the international financial system.
Furthermore, they will revealan intention to impose “restrictive” measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of the aforementioned sanctions.
For the time being, the White House didn’t reveal in the statement which Russian banks will be kicked out of the SWIFT system.
According to a report of Bloomberg, the move is primarily aimed at Russian banks that have already been sanctioned by the international community but can be expanded to other Russian financial institutions as well. However, one official said transactions involving energy might be exempted from the SWIFT sanctions.
The Belgium-based SWIFT said that it is engaging with European authorities to understand the details of the entities that will be subject to the new measures.
The SWIFT statement as well as the aforementioned report are both reflections that the SWIFT sanctions on Russia have not “materialized” as of now, experts said, as multiple sides are weighing the effects of such a major sanction measure over its consequences.
“The chances of the sanctions being actually effective are not large, as the world still needs Russia for things like its energy supply. In particular, if the sanctions are implemented, it would bring relatively large economic pain to the European economy,” Tan Yaling, dean of China Foreign Exchange Investment Research Institute told the Global Times on Sunday.
However, experts acknowledged that if Russian banks are indeed excluded from the international SWIFT system, it would incur a big impact on Russia’s international trade, as about 70 percent of Russia’s outbound financial receipts and payments will be forced to halt, experts estimated.
But how that would impact Russia’s economy is hard to say, as Russia has already and could use a number of methods to offset such impact, such as barter trade, correspondent banks, or use international payment systems other than the SWIFT.
“For example, the proportion of Russian companies using CIPS, China’s international payment system, will increase as a result of the sanctions,” Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times.
Russia also developed its own equivalent of SWIFT system named SPFS in 2014, after the US then also threatened to disconnect Russia from the SWIFT system.
Earlier, former President Dmitry Medvedev also warned on social media that Moscow may respond to Western sanctions by opting out of the last nuclear arms deal with the US, cutting diplomatic ties with Western nations, as well as freezing their assets.
SWIFT Photo: CFP
