23:32 GMT02 December 2020
Listen Live
    Opinion
    Get short URL
    0 172
    Subscribe

    While the West is threatening Russia with the new round of sanctions and even disconnection from SWIFT, experts say it would bring more harm than good to European businessmen.

    MOSCOW, January 29 (Sputnik), Ekaterina Blinova — In the wake of Ukraine's turmoil, the West is threatening Russia to tighten sanctions, particularly exclude the state from the SWIFT payment system; so, what is SWIFT and what may happen if Moscow's Western partners decide to disconnect it from the payment system.

    "If there is no SWIFT, there is no banking . . . relationship, it means that the countries are on the verge of war, or they are definitely in a cold war. The next day, the Russian and American ambassadors would have to leave the capitals" warned Andrei Kostin, Chief Executive of VTB, Russia's second-largest bank, while commenting on the issue, as cited by the Financial Times.

    So what is SWIFT? SWIFT (The Society for Worldwide Interbank Financial Telecommunication) is a Belgium-based organization providing a network that enables secure communications between international financial institutions. The Washington Post characterizes it as "one of the core frameworks of international finance," emphasizing that the system plays a key role in global economy.

    Russia joined the global interbank system in 1989 and is currently sending over 360,000 messages per day, making it one of the most active users of

    SWIFT globally, according to Roman Chernov, the head of SWIFT in Russia, as quoted by RIA Novosti.

    Will exclusion from SWIFT deal a severe blow to Russia's economy? Unlikely, experts say. Disconnected from SWIFT, Russian businessmen will send their messages via other communications means, such as archaic fax machines and telexes. Yes, it would take more time but it would not halt Russia's financial transactions.

    On the other hand, it would probably prompt the Russian banking sector to create a reliable alternative for SWIFT to ultimately shift to Eastern markets. As a result, the Belgium-based organization would lose a big customer and Western businesses will lose their market shares in Russia. Furthermore, in retaliation for the ban Moscow might seize Western assets in Russia, amounting to $3-$5 trillion, according to some estimates. Meanwhile, in December 2014, Russia's Central Bank initiated development of a new payment system in order to diminish Western financial dominance over Russia. Thus far, the decision to disconnect Russia from SWIFT would inevitably lead to what Andrei Kostin qualified as an economic "war."

    Will SWIFT disconnect Russia? Pointing to the earlier fact that SWIFT stopped facilitating transactions for Iranian banks, the Washington Post suggests that the Belgium-based organization could impose sanctions on Russia "if it is told to." However, the European organization holds a different opinion from that of the US media outlet regarding the issue.

    In October 2014, SWIFT stressed it had "no authority to make sanctions decisions," and expressed regrets about the pressure from Western policy-makers. SWIFT has repeatedly proclaimed itself an "apolitical" entity. At the same time, European leaders admit that such a measure would not prove effective. According to Reuters, the European Commission is not considering Russia's exclusion from SWIFT "because it could lead to the creation of an alternative system by Russia and other countries that could harm the Belgian-based global clearing house."

    "We have heard signals that sanctions could be extended and expanded. We consider them senseless and harmful for everyone," stressed Russian Deputy Prime Minister Arkady Dvorkovich, as cited by Reuters.

    The views and opinions expressed in the article do not necessarily reflect those of Sputnik.

    Related:

    Moscow Promises 'Unlimited' Response if SWIFT Limits Operations in Russia
    Members of Customs Union Plan to Create SWIFT Equivalent
    European Parliament Calls For Excluding Russia From SWIFT System
    Russian Finance Ministry Considers Regulating System for SWIFT, Bloomberg, Reuters
    Tags:
    economy, business, sanctions, SWIFT payment system, Ukraine, Russia
    Community standardsDiscussion