26 Feb 2022 21:58
Many who could barely find Ukraine on the map are now calling for a Russian ban on SWIFT, a payment system they neither know nor understand. While Russia is already preparing, the consequences would be devastating, especially for Germany.
An analysis by Kaspar Sachse
A complete exclusion from the international payment system SWIFT is considered the toughest sanction of the West against Russia. Until a few days ago, according to French Finance Minister Bruno Le Maire, this “financial nuclear weapon” was also ruled out by US President Joe Biden.
But over the weekend, well-known German politicians voted in favor of the exclusion force. But there is a problem: the already heavily counted German industry is on gas and oil supplies like hardly any other EU country reliant, and the East German economy in particular is closely intertwined with that of Russia. This arises loud to the Handelsblatt already pointing to “significant setbacks”.
What is SWIFT and who is calling for the Russian ban?
The Society for Worldwide Interbank Financial Telecommunication, or SWIFT for short, is a Belgium-based corporation founded in 1973 organization. It operates a particularly secure telecommunications network, the SWIFTNet, which is used by more than 11,000 banks worldwide for financial transactions in over 200 countries. Anyone who is not there has a problem: Iran was already excluded from the payment system in 2012 – and has since been heavily isolated, including when it comes to selling its oil.
To what extent the responsible politicians the possible consequences for the German economy, but also the population in the repeatedly advanced fight for “Freedom”, “Democracy”, “Human Rights” and the “Rule of Law” even guess remains to be seen.
Finance Minister Christian Lindner marked the beginning of a possible economic escalation at the meeting of EU finance ministers on Friday. He said:
“We have decided on harsh sanctions that will affect the Russian economy and, unfortunately, the Russian people.”
Furthermore, “all options are on the table”. The include also a possible exclusion of Russia from the SWIFT agreement. Foreign Minister Annalena Baerbock tweeted on Friday:
“With today’s package of sanctions, we are making it clear to Putin that the path of violence he has taken is leading to economic ruin in Russia. We are hitting Putin and his system profiteers, we are hitting the banking and financial sector, we are hitting the economy.”
At the same time, Baerbock pointed out that a Russian SWIFT exclusion would result in “massive collateral damage” for the German economy, but also for the population in terms of security of supply would have. she expressed with regard to the war in Ukraine:
“We would do everything we could to stop this madness. But we also have to make sure that we don’t choose instruments that Putin ends up laughing at because they hit us much harder.”
Some of her party colleagues see it differently: Jan Philipp Albrecht, successor to Economics Minister Robert Habeck as Energy Minister in Schleswig-Holstein, spoke on Friday of a “massive wrong decision”. And the former Green Minister of State in the Foreign Office, Kerstin Müller, asked the question on Twitter with a focus on Habeck and Baerbock:
“Unfortunately Swift not on the list – prevented by @government17 @ABaerbock @Chancellor and #Italy. […] How can that be? What else has to happen for a resounding package of measures to be decided on?”
Chancellor Olaf Scholz has also received criticism from all sides: it is not only European heads of state such as French President Emmanuel Macron who are increasingly paving the way for a Russian SWIFT ban free, the SPD’s own youth organization also stabs the chancellor in the back. She tweeted on Saturday:
“The federal government must commit to this as soon as possible, together with its western partners, Russia from the payment service provider #SWIFT ruled out!”
She receives support from a completely different camp: CDU politician and transatlanticist Norbert Röttgen shares this position. He also wrote on Saturday:
“If the federal government now continues to block Russia’s exclusion from #SWIFT, we will isolate ourselves completely. Europe and the world will not soon forget that!”
How is Moscow reacting?
This scenario has probably been planned in Moscow and alternatives to SWIFT are in hand. As the Crown reportedthe possible complete exclusion of Russia from the international banking network does not have to lead to total financial isolation in the medium and long term, according to economic and financial experts.
In the field of digital currencies, the Russian Federation has alternatives such as Bitcoin, which is already an official means of payment in El Salvador, said Philipp Sandner from the Frankfurt School of Finance & Management. Switching to the Chinese e-yuan is also on the cards. Ross Delston, Anti-Money Laundering Compliance Expert, reveals nvthat Russia is probably well prepared:
“If the Russians decide – and I’m sure they already do – not to use any currency other than cryptocurrencies, they can bypass virtually all sanctions.”
What are the consequences?
It is feared that all trade between the West and Russia could collapse. Excluding Russia would ensure that all payments to and from Russia would be blocked. But not only crude oil, gas and coal are imported in Germany on a large scale, grain prices could also explode.
A SWIFT exclusion would not only be fatal for German and Russian consumers, but also for banks and companies. But that doesn’t seem to bother the transatlanticists in the Union in particular. CDU leader Friedrich Merz had warned on Friday of “massive setbacks” for the German economy as a result of a SWIFT sanction, he wrote on Twitter on Saturday:
“After one #SWIFT-Exclusion of Russia can supply energy from #Russia may still be paid in the future. Our high dependency on gas supplies from Russia is therefore not a viable argument against this now necessary sanction.”
And because of the Russian attack on Ukraine, the German government also spoke out in favor of a “targeted and functional” restriction of the international payment system SWIFT nv on Saturday reported. Accordingly, work is being done “at high pressure” on how Russia’s decoupling from SWIFT can be limited in such a way that “it hits the right people,” said Baerbock and Habeck in unison.
The Ukrainian President Vladimir Zelenskiy had already urged the EU to completely exclude Russia from the SWIFT system in addition to the tough sanctions that had already been decided against Moscow. One thing is certain: After the Corona crisis, which is far from over financially (keyword: inflation), a Russian SWIFT exclusion would be the next low blow for the German economy. And it is also clear who will foot the bill alongside companies: German taxpayers, consumers and savers.
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more on the subject – German consumers will soon pay twice as much for gas?