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Global: SWIFT decision for Russia

by sermayedunyasi

The Western world (USA, Canada, England, France, Germany, Italy) announced that they have removed the already sanctioned Russian banks from the SWIFT system. For now, the SWIFT ban only includes banks included in the current sanctions package. However, depending on the progress or duration of the war, there is also the possibility of expanding it to cause more direct damage to the Russian economy. Energy sector companies, on the other hand, seem to be left out for now, in order not to harm Europe’s needs. Searches on this subject will continue. There are also some issues that prevent the Central Bank of Russia from using reserves to overcome this situation. According to this;

 

·        First, the selected Russian banks will be removed from the SWIFT messaging system. This will allow these banks to become disconnected from the international financial system and undermine their ability to operate globally.

·        Secondly, restrictive measures will be taken to prevent the Central Bank of Russia from using its international reserves in a way that will weaken the effect of sanctions.

·        Third, action will be taken against individuals and organizations that facilitate the war in Ukraine and the harmful activities of the Russian government. In particular, measures will be taken to limit the sale of so-called golden passports, which allow wealthy Russians affiliated with the Russian government to become citizens of Western countries and access their financial systems.

·        Fourth, a transatlantic task force will be launched next week to identify and freeze the assets of sanctioned individuals and companies within its jurisdiction to ensure effective enforcement of financial sanctions.

·        Finally, coordination against disinformation and other forms of hybrid warfare will be increased.

 

It will undoubtedly be harmful to the economy, and it will be a measure that will make international money transfer difficult in foreign trade, with Russian banks out of the system. At this stage, we see that the sanctions remain punitive rather than deterrent. Since it does not include all Russian banks (extendable on a case-by-case basis, of course), this can be circumvented by diverting trade and transfers to non-sanctioned banks. As a result, these transactions are carried out by mutual agreement and the use of correspondent banks. The fact that the sanction is limited to selected financial players is because Russia’s foreign trade is very complicated and Europe needs Russian energy resources very intensely. Therefore, sharply pushing all financial institutions out of business will do the damage not only to Russia, but also to countries that trade with Russia and transfer funds. In other words, you do not apply the sanction only to Russia. Those who export to Russia better start looking for new markets and strategic partnerships now.

 

The systems of Russia and China are alternatives that can be used to reduce the bindingness of a possible SWIFT move. However, if we consider the monopoly structure and incomparable technological structure of SWIFT; CIPS and SPFS need further development. SWIFT is obviously more common and useful because of the difference in data transfer capacity. In addition, SWIFT can be used 24/7.

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