Despite the lack of weapons, some called it the “nuclear option.” While the Russian-led military invasion of Ukraine will continue, Western nations are considering implementing it, with more than a hundred already dead. Further sanctions on the regime of Russian President Vladimir Putin.
On Thursday, the United States, the United Kingdom and the European Union (EU) announced a set of measures Approval Russia For the deeds he did in Ukraine.
The measures include the freezing of assets of several Russian banks and billionaires close to Putin, as well as the EU banning the sale of aircraft to Russian airlines and the suspension of Russian airline Aeroflot operations in the United Kingdom. . But these sanctions are not enough for the Ukrainian president.
“We are We only protect our stateHe promised on Friday. “Just like yesterday, the most powerful forces in the world are watching from a distance. Did yesterday’s sanctions convince Russia? We listen to our heavens and see in our land that they are not enough.
According to experts, one move that could hit Moscow hard is to cut off Russian banks’ access to the Belgian-based SWIFT network.
What is a SWIFT Network?
The Global Association of Banks and Financial Relations (SWIFT) is the main banking-run news organization. Faster and safer cross-border money.
It is used by 11,000 banking companies in more than 200 countries and allows international trade to proceed smoothly.
Created in 1973, the SWIFT network transmits more 40 million messages a dayTells users when their payments were sent or received.
It is believed that more than 1% of the millions of dollars exchanged thanks to it involves Russian transactions.
Ukrainian Foreign Minister Dmitry Kuleba called on Russia to withdraw from the organization when EU leaders met on Thursday to discuss sanctions.
“I will not be diplomatic in this. All skeptics now need to understand whether Russia should be excluded from the SWIFT, the blood of innocent Ukrainian men, women and children Will be in your handsGuleba tweeted.
But Brussels refuses to support this permission.
“This is not a unilateral decision.”
One of the main reasons for Russia’s reluctance to cut off access is that Europe is using it to pay for gas it buys from Moscow. Therefore, this move could cause problems for the federation as it has high reliance on various countries such as Austria and Finland. , From Poland and Germany, Russian gas.
It is believed that Germany It is also one of the main opponents of Russia’s exclusion from the SWIFT.
French Finance Minister Bruno Le Myre promised on Friday that only this option would be used As a last resort.
However, countries such as the United Kingdom continue to press for the use of this important barrier.
“We want to go further and we want to do the SWIFT system, a financial system that allows Russians to move money around the world to receive payments for their gas,” UK Defense Minister Ben Wallace said on Friday. On the BBC.
“Unfortunately the Swift system is not under our control. This is not a unilateral decision“, He added.
Political scientist Cynthia Roberts, a professor of political science at Hunter College, has been shown by Russia’s invasion, which began on Thursday, that Russia has more interest in Ukraine again and is “willing to pay higher costs” to impose its will.
“The rhetoric of some Western politicians They and the Western people do not agree with the price they are willing to payHe tells BBC Mundo.
Who controls the SWIFT network?
Swift was created by American and European banks, a company that does not want to create its own system and create a monopoly.
The network is present More than 2,000 banks are jointly owned And financial institutions.
The organization is overseen by the National Bank of Belgium, in conjunction with major central banks around the world, including the US Federal Reserve and the Bank of England.
How will this affect Russia?
When Iran withdrew from the SWIFT network in 2012 as part of sanctions for the development of its controversial nuclear program, it lost almost half of its oil exports and 30% of foreign trade revenues.
If it is decided to exclude Moscow from the system, Russian companies will lose access to the network and the normal and instant transactions that it offers. Their millionaire money for energy and agricultural products Thus exports will be severely affected.
Banks will have to deal directly with each other, adding additional delays and costs, which will ultimately reduce Russian government revenue.
When Crimea annexed Crimea in 2014, it threatened to expel Russia from Swift. This action a Declaration of war.
Western allies did not accept the permit, but the threat prompted Russia to create its own system for cross-border transfers and to create a national tariff card system called MIR for card payments.
However, at present some foreign countries use it.
Why are some countries reluctant to expel Russia from the SWIFT?
Removal of Russia will affect companies that supply and purchase goods from Russia. Germany is one of the most vulnerable countries in the West.
Russia is a major supplier of oil and natural gas to the EU, and finding alternative supplies is not easy.
Although the West expelled Iranian banks from the system in 2018, the Russian economy is still huge. Russia is the EU’s fifth largest trading partner.
According to expert Cynthia Roberts, there is a problem of selfishness and “interdependence”.
“Russia is a major power and the global economy and some sanctions will cause greater mutual harm in energy, minerals, wheat, etc.,” he explains.
“The Russian elite has previously threatened retaliation for actions such as its removal from the SWIFT, ranging from gas flow disruptions to cyber-attacks by government or state-recognized non-government actors (Russian)”.
Companies indebted to Russia must find alternative ways to obtain fees that could unleash chaos in the international banking system.
Alexei Kudrin, Russia’s former finance minister, has suggested that Russia’s economy could shrink by 5% if it withdraws from the SWIFT.
But there are questions about the lasting impact on the Russian economy. Russian banks can pay with their own payment system, such as China, which does not impose sanctions.
This will encourage China to strengthen its SWIFT rival CIPS and thereby increase cross-border yuan payments.
All of this would undermine the dominance of the US dollar and its key role in the world financial system.
According to Roberts of Hunter College, China and Russia are at the forefront of efforts to control the dollar system and Western financial institutions, and to create a parallel financial system to protect their economies from potential obstacles.
“Although Russia’s financial reporting system is very basic, China’s development is very advanced, and this will bring them closer together and lead to the creation of an alternative financial orbit that will, in the long run, weaken China’s leadership and structural power. The US and Western order,” he concludes.
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