After the completion of the construction of the Nord Stream 2 gas pipeline, rumors that Russia may be disconnected from SWIFTflashed with renewed vigor. On September 16, the European Parliament called on the EU countries to rebuff the Kremlin if it continues to pursue its aggressive policy.
One of the methods of fighting the Russian Federation may be to disconnect the country from the international payment system. OBOZREVATEL figured out in which case the European Union will take such a step and what this may turn out to be for the Russian regime.
What’s happening?
The European Parliament adopted a resolution on the relations of the European Union with Russia. The document says that the EU should continue to support the states of the Eastern Partnership, such as Ukraine and Georgia, as well as promote reforms and fundamental freedoms in the region.
The text says that the Nord Stream 2 gas pipeline risks increasing the dominance of the Russian Federation and the EU’s dependence on Russian gas. It also exposes Ukraine to aggression from Russia and must be stopped immediately, even if its construction is completed.
In addition, the EU must be prepared to use its leverage and call for the exclusion of the Russian Federation from the SWIFT payment system – to keep the Kremlin from further aggressive behavior.
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“The EU should be ready to use its influence and call for disconnecting Russia from the SWIFT payment system in order to deter the Russian authorities from further aggressive behavior, and should be ready to gradually stop imports of oil and gas from Russia if the Russian authorities continue their threats to states- members and military action against the countries of the Eastern Partnership, “- said in the message.
What is SWIFT and why is it so important?
It is an international system in which banks exchange payment information. It is used by thousands of financial institutions around the world – about 10 thousand banks.
SWIFT is not a payment system like VISA or MasterCard, but a convenient and cheap interface for information support of interbank payments.
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For example, when a bank needs to send a payment to another bank, it prepares a message, encrypts it using a special program, and then sends it to its counterparty through the terminal. All this happens within the framework of SWIFT.
To demonstrate the importance and lack of alternatives of the system, let us compare it with the social network Facebook: even if we take into account that it has flaws or an inconvenient interface, people will still continue to use it, because they are used to it and it has happened historically.
Can they disconnect from SWIFT?
Yes, there have been similar cases in history. For example, in 2012, the US banking committee forced SWIFT to disconnect Iranian banks that were associated with the nuclear program from the system.
After the occupation of Crimea, Western states urged to disconnect Russia from SWIFT, but in the end, no real steps were taken. But in 2017, the Russian RNKB and Tempbank lost the opportunity to use the system due to US sanctions.
How will the shutdown turn out for the Kremlin?
It is very difficult to predict the consequences of Russia’s shutdown – everything will depend on the wording of the ban. If all banks of the country fall under the sanctions, then the Russian Federation will actually find itself in financial isolation. This has never happened in world history.
If the restrictions affect only a part of the banks, then the consequences will not be so destructive. But in any case, this will lead to the paralysis of the Russian economy, which is already suffering from Western sanctions.
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Here are the possible consequences of disconnecting Russia from SWIFT:
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it will be almost impossible to transfer money to the country, only by roundabout ways – through bank accounts in the UAE, Turkey, Iraq or Taiwan. Most European investors or buyers will certainly not do this;
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currency shock – the dollar and euro will again rush to test the highest levels;
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outside the country, Russians will not be able to use MasterCard and VISA bank cards;
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there will be problems with international transfers, including dollar transfers. The money will take much longer. This will primarily affect importers and exporters – and for “small” and “medium” businesses, this means actual death;
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delivery times for foreign products will be disrupted, which will lead to a shortage in stores.
The first president of Ukraine Leonid Kravchuk called the imposition of such sanctions is a disaster for Russia. According to him, the Kremlin has only one option – “billions of cash in suitcases.”
“These will be not just consequences, but catastrophic consequences. Imagine: Russia exports gas, but cannot receive dollars for it, because there are no mechanisms to pay for gas in rubles – there is no such currency recognized by the world … This means that Russia can trade only with countries that will settle either in rubles or in other currencies, but not in dollars or euros, “he noted.
Diplomat and expert in the field of international law Vladimir Vasilenko in the commentary OBOZREVATEL noted that disconnecting from SWIFT is “withThe most severe sanctions that have been proposed to be imposed on any state. “
“The source of all problems in the world today is Russia. It grossly violates the norms of international law, creates chaos in Western countries. The West does not pursue a clear policy towards Russia, and this creates a danger for the West itself. A condescending attitude towards Russia, all kinds of concessions, attempts to appease she is only whetted her appetite and encouraged to further aggressive actions. It is necessary to create conditions when the Russian Federation will not be able to use energy resources as a geopolitical weapon, “he said.
At the same time, the ex-representative of Ukraine to the UN Volodymyr Yelchenko is sure that while the West will not use this lever of pressure – “but if Russia continues to behave this way, then this prospect can be realized.”
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The diplomat noted that disconnecting from SWIFT is not an easy step, since Russia’s partners in the West may also suffer. “But I believe that this is the most significant step in further sanctions against Russia, since it will very painfully hit the financial system of this country,” Yelchenko stressed.
Commenting on the resolution of the European Parliament, the ex-ambassador noted: “I don’t think it is 100% guaranteed, but if such a resolution has been introduced, it means that there is a certain number of deputies who support it. I think it will be done.”
Does Russia have a way out?
Yes. First of all, stop aggression against Ukraine… In this case, the West will stop threatening the Kremlin with disconnecting from SWIFT. Another option is to find an alternative to this international system.
As one of the ways to avoid the collapse, the Russian authorities are considering integration with the Chinese CIPS. However, unlike SWIFT, it is only intended for transactions in RMB. And the international currency, as you know, is still the dollar.
The Ministry of Foreign Affairs of the Russian Federation also stated that the country may have its own analogue of SWIFT. However, even Russian experts have little faith in the feasibility of this plan.
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“In order to make a full-fledged alternative, it is necessary to actually build a similar international system, which would be trusted by all financial institutions of the world, and at the same time, the system should not be associated with only one of the countries of the world, would have simple exchange formats, the same regulatory requirements for to all participants. It is impossible to repeat this on the basis of any single national payment system “, – spoke economist Mikhail Leites.
Undoubtedly, on September 16, the European Parliament passed a historic resolution. However, disconnecting Russia from SWIFT is a measure that is used only as a last resort, for example, if the Russian Federation tries to launch a full-scale invasion of Ukraine. Now the authorities of our country should seek and seek the introduction of sanctions against Nord Stream 2, since the Russian gas pipeline threatens the national security of both Ukraine and Europe.
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