The United States and Europe impose sanctions on Russia with "SWIFT delisting" or reverse pressure

(Washington Observer) The United States and Europe impose additional sanctions on Russia for "SWIFT delisting" or reverse pressure

　　China News Agency, Washington, February 26th: The United States and Europe impose sanctions on Russia with "SWIFT delisting" or reverse pressure

　　China News Agency reporter Chen Mengtong

　　The United States and the European Union issued a joint statement on the 26th saying that in response to Russia's military action in Ukraine, they decided to exclude some Russian banks from the Society for Worldwide Interbank Financial Communication (SWIFT) payment system.

　　This is a sanctions "card" that has been considered until the United States and Europe have been slow to reach a consensus.

Analysts generally believe that cutting off the world's most common method of financial information transmission will cause short-term "pain" to the Russian economy, but at the same time, Western countries have to face the "side effects" brought about by sanctions.

　　In the context of the continuous escalation of the situation in Ukraine, the removal of Russia from the SWIFT payment system on the one hand reflects a major escalation of sanctions against Russia by the United States and its allies. Realistic pressures and political considerations.

Room for maneuver in Russia's short-term "labor pains"

　　The Society for Worldwide Interbank Financial Telecommunication is a global trade association headquartered in Belgium.

SWIFT's messaging platform connects more than 11,000 financial institutions in more than 200 countries and regions around the world, and is regarded as a key hub for international payments.

According to The Washington Post, the SWIFT payment system sent an average of 42 million orders and confirmations a day last year, including payments, transactions and currency exchanges.

About 1% of the information is Russian-related payments.

　　The United States "Foreign Affairs" magazine (Foreign Affairs) analysis believes that the value of SWIFT lies in its speed and network scale.

Restricting Russia's access to the world's most pervasive global financial communications network would make it harder for Russian entities to process financial transactions and could limit Russia's ability to conduct financial operations abroad.

　　In fact, when the Crimea crisis broke out in 2014, Western countries considered using "SWIFT delisting" to sanction Russia.

A report by the Carnegie Moscow Center said that, according to Russia's assessment at the time, being removed from the SWIFT payment system could shrink Russia's GDP by 5%.

But Russia has since consciously started to reduce its reliance on the U.S. dollar payment system.

　　Russian Foreign Minister Sergey Lavrov said in January that Russia was trying to reduce its reliance on the dollar.

He noted that Russia is facilitating the transition to local currency settlements in every possible way.

Although the current financial information transmission system developed by the Russian central bank is not as mature as the SWIFT payment system, it is "really effective".

　　Not only that, but the exposure to Western banks caused by sanctions also cannot be ignored.

Without the SWIFT payment system, it would be difficult for Western banks to recoup borrowed funds from Russian entities.

The Wall Street Journal cited data from the Bank for International Settlements as saying that Russian entities borrowed about $121 billion in assets through foreign banks, of which about $14.7 billion came from U.S. banks and $25 billion came from Italian and French banks.

The policy dilemma behind the "hesitation" of the United States and Europe

　　"Removing Russia from the SWIFT system may not have the effect many policymakers hoped for." Adam Smith, a former senior adviser to the U.S. Treasury Department's Office of Foreign Assets Control, believes that compared to sanctions against smaller economies countries, massive sanctions on Russia could create economic risks for the U.S. and its allies.

That's why the U.S. and Europe have been wary of sanctions that could affect Russia's oil or gas exports.

　　The Economist uses data to explain why Western countries, especially European countries, are "hesitant" to use the SWIFT sanctions option: Russia is the EU's fifth largest trading partner, the source of 35% of Europe's natural gas supply, and the EU's 310 billion euros assets location.

In addition to the EU bearing these short-term costs, the dollar-dominated international settlement system will also be weakened in the long run.

　　For the United States, sanctions against Russia are likely to mean the dual pressures of high prices and high oil prices.

According to an analysis by Forbes magazine, in 2021, Russia will supply 7% of U.S. crude oil imports.

The vacant energy share created by sanctions on Russia will put additional upward pressure on global oil prices.

　　Bloomberg News pointed out that inflationary pressures in the United States have pushed up political risks for the Biden administration and the Democratic Party.

On the issue of sanctions against Russia, the United States has to maximize pressure on Russia while minimizing the impact of sanctions on American and European consumers.

　　At present, the details of the sanctions against Russia surrounding the SWIFT payment system in the United States and Europe have not been announced.

The Vice Chairman of the Russian Federation Security Council Medvedev has stated on the 26th that sanctions against Russia will not change anything, and Russia will respond to sanctions from the outside world.

(over)