SWIFT Disconnection Could Have Serious Impact on Russian Economy – RealnoeVremya.com
The latest round of US sanctions have had no effect on Russia’s interaction with international financial systems, but the issue of disconnecting the country from SWIFT, Visa or MasterCard is regularly raised as an option.
Disconnecting Russia from SWIFT could have serious consequences for Russian exporters, say EU journalist adding that it is still unlikely that the process will go beyond the threats of the United States and the European Union. SWIFT is an international interbank system for transmitting information and making payments. More than 11,000 organizations in 200 countries are connected to the system, with Russia being one of the three largest operators. SWIFT’s disconnection has been cited as a possible sanction measure since 2014, and the 46th President of the United States, Joe Biden, has put the measure back on the table.
Although Russia launched its own financial message transfer system in 2014, it does not yet fully replace SWIFT. The Russian system only includes Russian banks and a dozen foreign lenders from Eurasian Economic Union (EAE) countries, so it is not suitable for all international payments. Meanwhile, the volume of Russian export and import operations in dollars and euros is large, and it is impossible to find an alternative for many product groups, experts warn.
“The disconnection of SWIFT will cripple the transactions of Russian banks,” said Ararat Mkrtchian, chief strategist of Beta Financial Technologies, adding that major exporters will suffer the most. He warns that there will be a lot of middlemen bypassing the restrictions. “Financial institutions in EAEU countries will particularly benefit from this. “
“By itself, disconnecting Russian banks from SWIFT only increases the cost and slows down financial transactions between counterparties,” said Oleg Bogdanov, senior analyst at QBF, an investment firm. He says it will take some time to reestablish chains estimating this period to be a week or two.
However, the downsides of the proposal suggest that it will not be implemented. SWIFT is a private company and Russian banks provide it with money. The company is headquartered in Belgium, so an EU decision is needed to deactivate its customers. Another option is US sanctions against SWIFT itself, but European and US companies, which also use the technology, will remain bankrupt. Still, the issue is rather sensitive for Russia, and Moscow is working on possible measures to mitigate the potential damage. The Kremlin has repeatedly stressed the importance of promoting “alternative interbank payment systems independent of SWIFT and the United States”.
By Anna Litvina