The White House announced on the 26th that the United States and its major Western allies have reached an agreement to ensure that the Society for Worldwide Interbank Financial Communications (SWIFT) will interrupt services to some Russian banks.

Banning the SWIFT system is seen as a "big card" for sanctions against Russia by the West in response to the Ukraine crisis.

  A day earlier, US President Joseph Biden also said that some European countries were not ready to ban Russia from using the SWIFT system.

The reason for the hesitation within the Western camp is that playing out this "card" will harm not only Russia's interests.

  What is SWIFT

  Banned "financial nuclear bomb"

  According to a joint statement issued by the United States, the European Commission, France, Germany, Italy, the United Kingdom, and Canada, the ban on certain Russian banks from using SWIFT services is to "cut off these banks' links with the international financial system and combat their global operations. ability".

This means that relevant banks will not be able to conduct transactions with foreign banks, making Russia's foreign trade, foreign investment and remittance more troublesome.

At the same time, the restrictive measures against the Central Bank of Russia will cause its related assets to be "paralyzed", making it difficult to provide economic support to sanctioned banks and companies, greatly weakening the ability of macro-control.

  The joint statement of the day did not list the Russian banks that will be excluded from the SWIFT system, but US officials revealed that the relevant sanctions target 10 of Russia's largest financial institutions, whose assets account for nearly 80% of the total assets of the Russian banking industry.

The relevant list will be drawn up within a few days.

  SWIFT was founded in 1973 and is headquartered near Brussels, the capital of Belgium. Its main function is to transmit settlement information between global banking systems to achieve safe and efficient cross-border payments.

More than 11,000 financial institutions in more than 200 countries and regions use the communication services provided by SWIFT.

  Banning the use of SWIFT is recognized as a "financial nuclear bomb".

As early as the escalating conflict between Russia and Ukraine, the United States and EU countries have begun to discuss the banning of the SWIFT system as one of the most severe financial sanctions against Russia.

  In fact, as early as 2014, the United States and its European allies considered using the SWIFT system as a tool for sanctions against Russia, and former Russian Finance Minister Alexei Kudrin estimated at the time that cutting ties to the SWIFT system would allow Russia’s GDP falls by 5% in a year.

Therefore, Russia retorted at the time that if it was expelled from the financial trading system, it would be regarded as a declaration of war against Russia.

Once Russia is cut off from the SWIFT system, Russia's international financial transactions, including oil and gas export earnings, which account for more than 40% of the country's total revenue, will be cut off, with immediate and long-term effects on its economy.

  two-way influence

  Damage the interests of Western companies that have economic and trade relations with Russia

  When this "financial nuclear button" is really pressed, what should Russia do?

  According to foreign media reports, analysts pointed out that since 2014, in order to alleviate the economic blow that may be brought about by the economic sanctions of Western countries, Russia has taken various measures, such as increasing gold and foreign exchange reserves, and state-owned banks. risk exposure, etc.

  Russia's reliance on foreign investors has declined in recent years.

According to the Institute of International Finance (IIF), since 2014, Russia has been reducing its investment in U.S. Treasury bonds and dollars, while Russia's foreign exchange reserves have been growing, of which the dollar's share has gradually declined.

  Yang Xiyu, a researcher at the China Institute of International Studies, said in an interview with the media on the 24th that once the United States and Europe shut down the SWIFT system to Russia, it will be more painful for itself.

Russia occupies an important position in global energy exports, not to mention oil and natural gas. Russia is also the world's second largest producer of primary aluminum.

The surge in commodity prices will undoubtedly increase inflationary pressures in the United States and Europe.

  This move by the United States and its allies is intended to cause substantial isolation of Russia in the international financial community, which will affect Russia’s cross-border capital flows. The first is Russia’s foreign exchange earnings from exports, including Russia’s revenue from exporting energy products such as oil and natural gas. A major pillar of fiscal revenue.

  However, "disconnection" is two-way, and so is the damage.

Because Russia also uses the SWIFT system for foreign payments, the "disconnection" will undoubtedly directly damage the interests of Western companies that have economic and trade relations with Russia.

  When the situation on the Russian-Ukrainian border was tense, Ukraine asked the West to use this economic sanctions against Russia. However, Germany, Italy and other countries were concerned about the impact on their own companies and hesitated to take this step.

With the escalation of the situation in Ukraine, the Italian and German governments have expressed their support for measures to restrict Russia's use of the SWIFT system on the 26th, but they are still carefully weighing the scope of sanctions to avoid their own damage as much as possible.

  The joint statement issued by the West on the 26th read: "We are doing our best to study how to reduce the collateral damage of SWIFT's 'disconnection' measure and ensure that this measure hits the right target. What we need is targeted and practical SWIFT restrictions. ."

  Guntram Wolf, director of the Institute for European and Global Economics in Brussels, Belgium, told AFP that the "pros and cons" of banning SWIFT are "controversial", especially for European countries that buy large quantities of products such as Russian oil and gas. difficulties in paying.

  customary means

  As part of the sanctions against Iran's nuclear activities

  Taking advantage of its dominant position in the international financial system, the United States has drawn Western allies from time to time to impose sanctions such as "freezing assets" and "banning economic and trade exchanges" against other countries. "Prohibiting SWIFT" is a severe measure.

  As part of its sanctions against Iran's nuclear activities, the United States pressured SWIFT in 2012 to suspend services to Iran's central bank and some other financial institutions.

After the JCPOA was reached in 2015, many Iranian banks reconnected to the SWIFT system in 2016.

However, the U.S. government unilaterally withdrew from the Iran nuclear deal in May 2018, and restarted and added a series of sanctions against Iran. In November of the same year, SWIFT again announced the suspension of some Iranian financial institutions from using this system.

  After Crimea voted to join Russia in a 2014 referendum, the U.S. and European allies once threatened to use the tactic against Russia.

The Russian side warned at the time that this was equivalent to declaring war on Russia, and the West eventually shelved the idea.

Agence France-Presse reported on the 26th that excluding a major country like Russia from SWIFT may prompt Russia to speed up the development of an alternative cross-border financial services system.

  Western countries are also preparing to limit the ability of Russia's central bank to use hundreds of billions of dollars in international reserves to stabilize its currency and finances.

U.S. officials say the latest sanctions are aimed at sending Russia’s economy to a “free-fall” devaluation of the ruble and a “surge in inflation.”

  Chengdu Business Daily-Red Star News reporter Xu Huan Comprehensive Xinhua News Agency