Russia’s economy now faces a “severe recession” and a financial crisis that will strain Russian banks, Oliver Allen, markets economist at Capital Economics, wrote in a Monday note. Western allies have warned that they could add more banks to the sanctions list. The SWIFT ban, however, includes only some Russian banks, not all 300 Russian institutions that use the system, so it’s not exactly the “nuclear option” it was advertised as a few weeks ago, says Artyom Lukin, deputy director for research at the school of international studies at Far Eastern Federal University in Vladivostok, Russia. Without SWIFT, Russia’s banned banks will be forced to use inefficient methods like fax, telephone, email, and bank-to-bank transfers to execute cross-border transactions, hampering Russian business’s participation in international trade. SWIFT averages 40 million messages between platform users every day and accounts for more than half of all high-value cross-border payments worldwide.īanning Russian banks from using SWIFT cut the country off from a “key artery of finance,” Scheherazade Rehman, director of the European Union Research Center and professor of international affairs at George Washington University, told NPR. Federal Reserve and the European Central Bank oversee SWIFT, which links over 11,000 banks and financial institutions in more than 200 countries. SWIFT squeezeĮstablished in 1972, Belgium-based SWIFT-the Society for Worldwide Interbank Financial Telecommunication-is the primary global channel that moves money across borders smoothly and efficiently. While Beijing has the financial infrastructure to help Russia, it may lack the political will as Russian President Vladimir Putin’s assault on Ukraine escalates. had feared: Russia inching deeper into China’s financial world, but an all-out alliance is not certain. Excluding Russia from SWIFT and other harsh sanctions have already pummeled the country’s economy. But Russia’s egregious invasion of Ukraine convinced the West to take the unprecedented step. worried that banning Russian institutions from SWIFT might strengthen Moscow’s budding alliance with Beijing, bolster the two countries’ alternative payment systems, and boost Chinese renminbi (RMB)-denominated trade. The Western allies also balked at booting Russia from SWIFT for another reason: China.
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