Disconnecting Russia From SWIFT Will Cause Short-Term Pain But Long-Term Gain ? (07/03/2022) :

 

Written by Paul Antonopoulos, an independent geopolitical analyst. Source : infobrics.org 

BRICS is an acronym for the powerful grouping of the world's leading emerging market economies, namely Brazil, Russia, India, China and South Africa.

(Editor`s notice : This is a short summary of the original text).

 

Putin has for a long time encouraged businesses to expand domestically before Western nations lift economic sanctions, allowing once again the sale of many foreign goods in Russia.

Western financial institutes lose credibility for Eastern clients following Russia ban.
EU cannot block the reserves of the Russian banks that are in Moscow, or in China. In the last years, Russia has been placing their reserves more and more in countries where the west could not block. To day about 50% of Russia’s reserves could be blocked.

Russia has its own payment system, but has only 23 foreign banks connected to it to day.
According to Bank of Russia Governor Elvira Nabiullina: “We have the financial messaging system that can replace SWIFT inside Russia and allows the connection of foreign participants.”

China has its own payment system, too, with more take-up by international banks than Russia’s. Some critics have worried that banning Russian banks from SWIFT could drive Russia and China together, eroding the supremacy of the dollar-denominated global financial system.

On March 6, it was announced that Russian banks planned to issue cards using China’s UnionPay system, with Sberbank and Alfa-Bank saying they are working on a rollout of UnionPay cards. Only the day before, Visa and Mastercard announced that they would suspend operations in Russia.

Rosbank, Tinkoff Bank, and the Credit Bank of Moscow (MKB) are also working on releasing UnionPay cards, effectively meaning that Russia is being pushed into the financial arms of China by being banned from using SWIFT, Mastercard and Visa, in addition to a plethora of other sanctions.

Although Russians are undoubtedly facing a period of financial uncertainty and stress, the repercussions of such an economic war will only see Russia more independent from Western financial systems as it seeks to diversify – whether it be through its own system, China and/or even other emerging systems like India’s RuPay.

In fact, despite the short term hurt Russia will face, ultimately the highest price of sanctions could be paid by the EU, which has seemingly in an incomprehensible way underestimated the problems it would be exposed to, and how Russia would be able to link itself to Eastern systems in a relatively quick manner.

The current political and ideological divisions in the US will now be further exacerbated by the economic shock that will follow high oil price, and it is likely that the American public will quickly lose interest in Ukraine.

This economic war will prove only to weaken the Western liberal capitalist system as hundreds of billions of dollars will be disconnected from Western financial institutions and moved to the East – especially when traditionally neutral countries like Switzerland have actually sanctioned Russia, thus increasing the importance of Dubai for Russian investors.

Surely other financial centres to the East will also benefit from Switzerland’s move away from neutrality, as well as from Russia’s disconnect from SWIFT, Mastercard and Visa.

 

(Editor`s comment : 

US sanctions against Russia include a freeze on Russia's central bank reserves. Through the "militarization of the dollar", the US may thus have sent a strong message to China as well. China has $ 2-3 trillion in US government bonds).