Inflation danger & perhaps unset dollar as world currency.
Have to powers to be fully thought thru the Swift banishment threat?
https://en.wikipedia.org/wiki/Cross-Border_Interbank_Payment… The Cross-Border Interbank Payment System (CIPS) is a payment system which offers clearing and settlement services for its participants in cross-border RMB payments and trade. It is a significant financial market infrastructure in China. CIPS is sometimes referred to as the China Interbank Payment System.
https://www.unz.com/pescobar/follow-the-money-how-russia-wil… About the possible introduction of a new Russia-China payment system bypassing SWIFT, and combining the Russian SPFS (System for Transfer of Financial Messages) with the Chinese CIPS (Cross-Border Interbank Payment System), Hudson has no doubts “the Russian-China system will be implemented. The Global South will seek to join and at the same time keep SWIFT – moving their reserves into the new system.”
So the US itself, in another massive strategic blunder, will speed up de-dollarization. As the managing director of Bocom International Hong Hao told the Global Times, with energy trade between Europe and Russia de-dollarized, “that will be the beginning of the disintegration of dollar hegemony.”
It’s a refrain the US administration was quietly hearing last week from some of its own largest multinational banks, including notables like JPMorgan and Citigroup.
Moscow already linked its SPFS payment system not only to China but also to India and member nations of the Eurasia Economic Union (EAEU). SPFS already links to approximately 400 banks.
Meanwhile, we’re not even talking yet about Russian retaliation for these sanctions. Former President Dmitry Medvedev already gave a hint: everything, from exiting all nuclear arms deals with the US to freezing the assets of western companies in Russia, is on the table.
https://www.bloomberg.com/news/articles/2022-02-25/wall-stre… Wall Street Counsels Washington Against Kicking Russia Off SWIFT JPMorgan, Citigroup see possibility the move would backfire Secondary sanctions on Russian banks seen as best alternative Some of Wall Street’s largest banks told lawmakers and the Biden administration that kicking Russia off the SWIFT financial-messaging system would have far-reaching fallout that could hurt the global economy and undermine the purpose of the penalties, people familiar with the matter said. Opponents of the idea passed along a warning: Booting Russia from the critical global system – which handles 42 million messages a day and serves as a lifeline to some of the world’s biggest financial institutions – could backfire, sending inflation higher, pushing Russia closer to China and shielding financial transactions from scrutiny by the West. It might also encourage the development of a SWIFT alternative that could eventually damage the supremacy of the U.S. dollar.
Over the weekend, Western nations sharply escalated their economic pressure on Moscow as the United States, the European Union, and other allied countries, notably Japan and Canada, sanctioned Russia’s central bank. This blocked Russia’s access to some two-thirds of its nearly $600 billion worth of gold and foreign exchange reserves, or about $400 billion. That’s the total amount that was held electronically in foreign accounts of banks in the U.S. and allied countries.
There’s no doubt that these measures will deal a devastating blow to the Russian economy, almost certainly triggering its worst contraction in decades.
But the use of this nuclear sanctions option also carries costs and risks. That’s particularly true if sanctions are open-ended and long term, aimed at provoking regime change in Russia rather than linked to a diplomatic process to end the war in Ukraine.
sanctions of this severity, especially if not linked to a diplomatic process for reaching a peace agreement, can risk fueling further escalation of the conflict.
there is the possibility of economic spillover to the U.S. Sales of Russian energy commodities are exempted from the most severe financial sanctions, but the increasing intensity of general sanctions on the Russian financial system is causing energy buyers to substitute away from Russia energy and instead purchase from other sources. While this serves to increase pressure on the Russian economy, it also increases the price of other sources of oil, including those that account for the majority of U.S. imports. the demonstration of the financial power of the U.S. and its allies to seize the assets of a rival nation will greatly increase incentives for creating alternatives to the dollar-centered global financial system.
Russia’s GDP does not matter in the scheme of that.
Russia needs to import finished goods. While some of that is from China, they are dependent on the west more so.
The west has frozen the Russian assets needed to use the SWIFT or the SPFS or CIPS. The Russian economy itself does not produce enough to make up the difference. Especially considering the depreciation in the ruble.
This is not any sort of kick in the arse for the west.
The only issue in any of this that is interesting is India. I would hope India will see the alliance of belligerent Russia and China as not in their interests.
Russia can, and will, shut down their ability to use the Russian system when it suits them. There will be nothing the other countries can do about it–except NOT use the system.
It might also encourage the development of a SWIFT alternative that could eventually damage the supremacy of the U.S. dollar.
Again, SWIFT is just the messenger, literally, although an important one. Plus, Gazprombank is not even on the list of banks affected by EU sanctions. The more important factor is freezing Russian’s foreign assets - especially the reserves of its central bank.