Screenshot of SWIFT official website.

  China News Service, February 27 (Reporter Li Jinlei) After the escalation of the conflict between Russia and Ukraine, the sanctions faced by Russia have also continued to escalate.

  The White House issued a joint statement between the United States and Europe on the 26th local time, saying that in response to Russia's military action in Ukraine, it has decided to exclude some Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system.

  The outside world generally believes that kicking out SWIFT is a financial "nuclear bomb" that will have a devastating impact on the Russian economy.

What exactly are SWIFT sanctions?

What does it mean for Russia?

  The full name of SWIFT is the Society for Worldwide Interbank Financial Telecommunication. It was established in 1973 and is headquartered in Brussels, Belgium. It is a non-profit cooperative organization among international banks and is responsible for managing the SWIFT settlement system.

The SWIFT settlement system provides secure financial information transmission services for global banks, other financial institutions and enterprises.

  Dong Ximiao, chief researcher of China Merchants Union Finance, told Zhongxin Finance that if a financial institution is banned from using the SWIFT settlement system, it basically cuts off its connection with the global interbank market.

If Russian financial institutions are banned from using the SWIFT settlement system, it basically means that it will be difficult for these financial institutions to transfer funds across borders, which may affect the smooth development of Russia's global capital exchanges and international trade.

  Dong Ximiao pointed out that excluding major Russian financial institutions from the SWIFT settlement system

is equivalent to removing Russia from the "circle of friends" in the international financial circle,

which basically means that Russia has cut off its ties with the international financial and trade system.

  After being kicked out, major Russian financial institutions will not be able to conduct cross-border payments and settlements with global banks and other financial institutions, and the Russian cross-border financial system is in danger of being paralyzed.

International investment and financing activities related to Russia may also be interrupted, which may further exacerbate the volatility of Russian financial markets and capital outflows.

The foreign-related income and expenditure of Russian residents is also in danger of being interrupted.

Therefore,

the exclusion of major Russian banks and other financial institutions from the SWIFT settlement system is no less than dropping a "financial nuclear bomb" on Russia. The consequences are relatively serious and the impact is far-reaching.

  Dong Ximiao believes that the major European and American countries announced that they will remove selected Russian banks from the SWIFT settlement system, and once again use the SWIFT settlement system as a means and tool to sanction their opponents. The field spread to the financial field.

  Dong Ximiao pointed out that it is worth noting that

the major European and American countries announced that some but not all Russian banks will be excluded from the SWIFT system, which may be to reserve payment channels for some EU countries to purchase Russian natural gas.

As we all know, some EU countries are highly dependent on Russian natural gas for energy.

Therefore, the sanctions did not exclude all Russian banks from the SWIFT settlement system. There may be considerations in this regard.

  Previously, the United States also used the SWIFT system as a sanction tool, sanctioning Iran, North Korea and other countries, excluding the two countries from the SWIFT settlement system, which had a greater impact on the economies of the two countries.

  Dong Ximiao believes that, in fact, the Russian government has long researched and responded to how to replace the SWIFT system as a hypothesis, such as adopting some alternatives, including building the Russian central bank's own financial information transmission system.

But so far, only 8 foreign banks have participated in the Russian central bank's financial information transmission system, which has played a very limited role.

Therefore, the exclusion of major Russian financial institutions from the SWIFT system this time will have a relatively large impact on the Russian economy, and this impact will continue for a relatively long period of time.

(over)

Keywords: