06:00 GMT +324 January 2020
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    The strategy the United States employed vis-à-vis Russia following the outbreak of the Ukrainian civil war could fundamentally affect the Western world by questioning the reliability of Western leaders and financial institutions, as well as paving the way for Russia to look for a creative strategic solution to the sanctions problem.

    The restrictive measures were "unleashed to isolate and destroy the Russian economy" but they go against Washington's rational self-interest and are damaging for the Western image if not its very soul, Scott Semet argues in an opinion for the National Interest.

    Consider this: "In an effort to punish Russian 'misdeeds,' two of the major forces that helped the West win the Cold War, namely capitalism and its necessary prerequisite, democracy, have been jettisoned when deemed expedient," he warned.

    Such decisions do not happen in a vacuum. If made once, they will surely be made again and they say more about the initiator than the target. After all, the West began to demonize Russia in response to Moscow's strengthening and reassertion.

    Semet claims that shutting Russia out of Western capital markets was not a smart choice although it was the most damaging economic measure undertaken.

    "In the long run, denying access to Western capital markets, the deepest and most liquid in the world, undermines their attractiveness to borrowers from other regions: Imposition of these sanctions was a wake-up call that borrowers can be shut of markets if they refuse to toe the line," Semet pointed out.

    Russia's new national payment card has been given a logo and a name – the 'Mir', a word translating into English as both 'Peace', and 'World'. The word is also associated in many Russians' hearts with the Mir space station, our planet's first modular space station, assembled in orbit between 1986 and 1996.
    © Sputnik / Mikhail Voskresensky
    The move also prompted Moscow to look for new sources of financing, indicatively non-Western.

    In addition, sanctions erode US credit card dominance while benefiting a Chinese bank card organization, according to Semet. Probably not incidentally, China's UnionPay is "the fastest growing credit and debit card company in the world, both in terms of transactions and cards issued."

    The company dominates settlement and payment services in the world's largest market making it a major challenger to Visa and MasterCard, Semet explained. UnionPay wants to issue as many as 2 million cards in Russia by 2016 and 20 top Russian banks are already onboard.

    The winning 'Mir' banking card design, featuring Mir attached to a wing and a stylized image of a globe.
    narodnayakarta
    The winning 'Mir' banking card design, featuring Mir attached to a wing and a stylized image of a globe.

    Worth mentioning is Russia's national payment system currently in development. Russian authorities have already presented the prototype credit card known as Mir (World), which is expected to enter mass production next year.  Some ten banks said they are ready to issue the Mir credit card, according to the Kommersant newspaper.

    The final restrictive measure often referred to as a nuclear option entails disconnecting Russia from the SWIFT system. Although unlikely to happen, the threat thereof has prompted Russia and China to think of an alternative. This desire will only increase, according to Semet.

    "Currently, many countries, particularly Russia and China, would like to end the ability of the West (the United States) to inflict such financial damage to achieve policy goals. Progress on this front has been glacial, since the economy is truly global and a wide variety of participants would have to accept the new system for it to work. Also, the costs of building it are enormous," Semet asserted.

    But in the case of an alternative to SWIFT it is the idea and the trend that truly count. Moreover, a viable alternative to SWIFT would be attractive for other countries and "might lead many to jump ship," he observed.

    "To achieve political ends, many actions undertaken by the West over the past few years, particularly against Russia, have impaired the value of societal and economic institutions that have helped the West achieve a higher degree of prosperity. This trend may intensify if policies and the means to achieve them are not scrutinized more carefully," Semet concluded.

    Related:

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    Washington Pursuing 'Dangerous and Losing' Strategy With Russia
    Russia Switches to National Card Payment System for Business Sovereignty
    BRICS Begins Consultations on Multi-Lateral Pay System Similar to SWIFT
    Tags:
    payment system, capital, anti-Russian sanctions, finance, global economy, geopolitics, Society for Worldwide Interbank Financial Telecommunication (SWIFT), China, United States, Russia
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