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What is SWIFT, and why does it matter in the Russia-Ukraine war?
rfenst Offline
#1 Posted:
Joined: 06-23-2007
Posts: 39,100
As the United States, Canada and European allies prepared to step up pressure on Russian financial institutions this weekend, they vowed to cut some banks off from the SWIFT messaging system, a network that connects banks around the world and is considered the backbone of international finance.

Whether to target Russia through SWIFT was an initial point of division among Western nations on sanctions in the Ukraine crisis, with the French finance minister calling a move to cut Russia off from the mechanism a “financial nuclear weapon.”

Here’s what you need to know about SWIFT and the debate about whether to pressure the network to exclude Russian financial institutions.

It is a messaging network that connects banks around the world and is considered the backbone of international finance. The Belgian-based consortium links more than 11,000 financial institutions operating in more than 200 countries and territories, acting as a critical hub to enable international payments. Last year, the system averaged 42 million messages a day, including orders and confirmations for payments, trades and currency exchanges. More than 1 percent of those messages are thought to involve Russian payments.

What role might SWIFT play in the Russian invasion of Ukraine?
Eastern European countries and France were among the early advocates of economic sanctions that would cut Russia off from SWIFT. Depending on how many banks the European Union and the United States plan to target through SWIFT, they could make it more difficult for Russian entities to process transactions and could hobble the Russian economy’s ability to do business beyond its borders. When Western nations threatened to use this sanction against Russia in 2014, after it annexed Crimea, the country’s former finance minister Alexei Kudrin said it could reduce the country’s gross domestic product by 5 percent within a year. Russia’s gross domestic product was about $1.7 trillion last year, making it the 12th-largest economy in the world.

“Our diplomats fought days-long and inspiringly, so that all European countries agreed to this very strong and just decision, to cut off Russia from the international interbank network,” Ukrainian President Volodymyr Zelensky said Saturday night.

U.S. and Europe take aim at Russian central bank reserves, threatening blow to economy

Are all 27 E.U. nations that have supported other sanctions against Russia backing the proposal to cut Russia off from SWIFT to the same extent?
No. Some nations have called for Russia to be cut off completely, but the German government said Saturday that it supports using the mechanism in a “targeted and functional” way. The sanctions that were announced later Saturday night were more in line with the limited approach supported by Germany than with the broader targeting advocated by other countries.

Under those current plans, Russia is expected to remain able to export gas to Europe. U.S. Treasury officials have said that a broader targeting of Russia through SWIFT could damage Western businesses, especially major oil companies. Banks in the United States and Germany are the most frequent users of SWIFT to communicate with Russian banks, making the two countries especially vulnerable to a fallout.

If Russian banks are cut off from SWIFT, are there alternative networks they can use?
Yes. Russia created an alternative network, the System for Transfer of Financial Messages, but financial experts say it is an inadequate replacement. By the end of 2020, the system included only 400 participants from 23 countries. There is also China’s Cross-Border Interbank Payment System, which would allow both countries to bypass SWIFT. This is a greater concern, since China is the second-largest economy in the world, and any strengthening of this alternative system could erode the current dollar-dominated global financial system, undermining Western power.

Europe says it has a 'financial nuclear weapon' it can use against Russia. But it is unsure if it wants to use it.

Can Russia use cryptocurrency to evade sanctions if it loses access to the SWIFT network?
Because there is no central controller that has the power to act as a gatekeeper, crypto could be used for things such as crowdfunding for the Ukrainian army or helping Russia evade sanctions. However, Russian cryptocurrency activity has historically paled in comparison with the transactions processed by its traditional financial institutions, so experts do not believe it could be used to fully replace SWIFT. Also, countries and their banking institutions that choose to help Russia evade this potential sanction could face negative consequences from dozens of nations across the world.

SWIFT is a consortium that is run by officials from its member banks, including the National Bank of Belgium, the U.S. Federal Reserve System, the Bank of England, the European Central Bank and the Bank of Japan.

If Russia is cut off from SWIFT, would it be the first country to face this sanction?
No. Iranian financial institutions lost their access in 2012, after the European Union imposed sanctions on the nation over its nuclear program. As a result, Iran lost 30 percent of foreign trade. Iranian banks regained access after the country signed onto a 2015 agreement to limit its nuclear activities. They were cut off again in 2018 after the Trump administration killed the deal and pressured SWIFT to follow suit.
RayR Offline
#2 Posted:
Joined: 07-20-2020
Posts: 8,796
Sanctions never hurt the dicktators, but they sure hurt and piss off the little people.

“When goods don’t cross borders, armies will.” - Frederic Bastiat
Sunoverbeach Offline
#3 Posted:
Joined: 08-11-2017
Posts: 14,586
I put a dollar in a change machine. Nothing changed.
- GC
Mr. Jones Offline
#4 Posted:
Joined: 06-12-2005
Posts: 19,359
Some "swiftoe in a bomb" was driving down the street...

And heeee peeked up your seeestor...

BWUHAHAHAHAHA!!!
Speyside2 Offline
#5 Posted:
Joined: 11-11-2021
Posts: 2,304
The Russian central bank raised interest to 20%.
rfenst Offline
#6 Posted:
Joined: 06-23-2007
Posts: 39,100
Speyside2 wrote:
The Russian central bank raised interest to 20%.

BOOM!
economic collapse due to uncertainty. what was it like six months ago?
ZRX1200 Offline
#7 Posted:
Joined: 07-08-2007
Posts: 60,476
LMAO crypto….
rfenst Offline
#8 Posted:
Joined: 06-23-2007
Posts: 39,100
ZRX1200 wrote:
LMAO crypto….

All the dominos are going to fall...

Crypto exchange Binance blocks Russian users targeted by sanctions


LONDON/MOSCOW, Feb 28 (Reuters) - Crypto exchange Binance is blocking the accounts of any Russian clients targeted by sanctions, it told Reuters on Monday, but will not freeze the accounts of others after Ukraine called for a block on Russian users at major digital currency platforms.

"We're blocking accounts of those on the sanctions list (if they have Binance accounts) and ensuring that all sanctions are met in full," a spokesperson for the company said on Monday, declining to give further details.

The United States, Britain, Europe and Canada announced new sanctions on Russia on Saturday, including blocking certain lenders' access to the SWIFT international payment system, following Russia's invasion of Ukraine. read more

Ukraine Vice Prime Minister Mykhailo Fedorov said on Sunday he had requested major crypto exchanges to block the digital wallet addresses of Russian users, which allow transactions in crypto coins.

Fedorov, who is also minister of digital transformation, had on Saturday offered a "generous reward" for information on digital wallets held by Russian and Belarusian politicians.

"It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users," he wrote.

A separate Binance representative told Reuters: "We are not going to unilaterally freeze millions of innocent users' accounts. Crypto was meant to provide greater financial freedom for people across the globe."

Binance, the world's largest cryptocurrency exchange, said last month it wanted to expand in Russia and neighbouring states. Russia is a major market for Binance, with over 113,000 members of its Russian-language Telegram channel. read more

Since 2019, Binance has allowed users to deposit and withdraw Russian roubles via payments company Advcash.

Advcash, which is headquartered in Belize, told Reuters that users would be able to continue to make instant deposits and withdrawals on Binance via its digital wallets.

"On our platform, some users may experience limitations arising from sanctions imposed on specific banks," it added.

"Making sure our services are transparent, fully regulated and provided in accordance with all applicable laws is and has always been our top priority."
ZRX1200 Offline
#9 Posted:
Joined: 07-08-2007
Posts: 60,476
Robert that wasn’t my point, any chance they get to portray crypto as evil….
rfenst Offline
#10 Posted:
Joined: 06-23-2007
Posts: 39,100
ZRX1200 wrote:
Robert that wasn’t my point, any chance they get to portray crypto as evil….

It's not evil, just another way of clamping down.
HockeyDad Offline
#11 Posted:
Joined: 09-20-2000
Posts: 46,065
Crypto is so evil even the Russians like it.
ZRX1200 Offline
#12 Posted:
Joined: 07-08-2007
Posts: 60,476
Robert context disconnect I’m not taking about Russian or sanctions.
rfenst Offline
#13 Posted:
Joined: 06-23-2007
Posts: 39,100
ZRX1200 wrote:
Robert context disconnect I’m not taking about Russian or sanctions.

Ooops! That's what I thought this thread was still about. My bad.
delta1 Offline
#14 Posted:
Joined: 11-23-2011
Posts: 28,754
thread jack over---back to the OP

hope this SWIFT move is as effective on Putin as it was on John Kerry...



stripping Putin and Russia's economy may have some good results in the long run...I don't see the Ukraine going away anytime soon...there are many more pro-independent and free Ukrainians than pro-Russian ones...a weakened Russia may exhaust all its resources and military power and still not be able to convert Ukraine into a vassal state



Sunoverbeach Offline
#15 Posted:
Joined: 08-11-2017
Posts: 14,586
Don’t sweat the petty things and don’t pet the sweaty things.
- GC
frankj1 Offline
#16 Posted:
Joined: 02-08-2007
Posts: 44,211
what's the difference between a ruble and a dollar?


a dollar.
DrMaddVibe Offline
#17 Posted:
Joined: 10-21-2000
Posts: 55,301
Getting the dollar removed as the defacto currency was always in play.

Jamie Dimon Warns SWIFT Sanctions May Bring Unintended Consequences, Can Be Circumvented


Just hours after western leaders slapped Russia with unprecedented sanctions the likes of which the world has never seen, including a targeted SWIFT expulsion of key Russia banks as well as an asset and transaction freeze of the Russia central bank, JPMorgan CEO Jamie Dimon explained not only why this harsh escalation may be futile but why it could backfire spectacularly in the years to come.

In an interview with Bloomberg TV, the CEO of the world's largest bank said that "there are a lot of workarounds for SWIFT, so there are different tools we use for different reasons" adding that “the banks are talking with the government so everyone understands the issues, not because they’re for or against any particular thing."

While SWIFT sanctions mean companies can’t use the messaging system to do business with the Russian entities affected, they can still do business with them, Dimon said. In fact it's as simple as sending an email with payment instructions, because what SWIFT really is, is a messaging remnant from a bygone era, before emails, even before the fax machine.

Dimon also said that disconnecting Russian banks from the SWIFT messaging system may bring “unintended consequences” that include third parties finding ways around the penalty.

“What countries do you hurt? What people are going to do workarounds?” Dimon said, referring to "bad players" and others finding workarounds, not his own firm, according to a company spokesperson. Dimon said sanctions, by contrast, are “very targeted, very specific, very clean.”

As Bloomberg reported on Friday, JPMorgan was among Wall Street firms that had counseled Washington against kicking Russia off SWIFT, arguing that it could have far-reaching fallout that could hurt the global economy and undermine the purpose of the penalties.

Dimon's full interview is below...

... and unlike his brutally wrong bitcoin predictions, Dimon will be right about SWIFT. In a rhetorical Q&A about the consequences of Russian SWIFT expulsions, Goldman asked whether there is concern this this would undermine the reserve currency status of the Dollar (and Euro) and responded:

The US is in a unique position of having the global reserve currency, which underpins a substantial portion of international trade and foreign exchange transactions, while also granting the Executive fairly broad discretion through IEEPA to restrict US capital flows by invoking security concerns. The widespread use of the Dollar in international markets, for instance, allows the United States to affect foreign policy goals through financial market channels (hard power) and may also confer certain reputational benefits (soft power). However, overuse of these powers could compel other actors to try to replace Dollar transactions, as Russia already did to some extent following earlier sanctions.

In this regard, the coordination across the G-7 is particularly important. Already, global reserve managers had relatively limited options for shifting reserves out of Dollars given limited supply of strong investment grade assets in the Euro area and limited capital market depth elsewhere. This is especially true for the large reserve managers, like China. But there are also implications for smaller central banks, many of which have used the BIS to facilitate new FX reserves in Chinese securities given the capital constraints, which supports our view that those investments are primarily aimed at diversifying and improving returns. Overall, while these actions could ultimately compel a change in reserve accumulation behavior, and support additional inflows to CNY, there is not really a viable alternative available at the moment for large reserve holders, especially when Europe is also participating in the sanctions.

An even more accurate take comes from the Bloomberg editors who wrote an article this morning explaining why "Wielding SWIFT Against Russian Banks Is a Big Risk" and in which they wrote:

Aside from the immediate collateral damage, excluding Russian banks from SWIFT risks longer-term consequences for international finance. As with any network (think Facebook), the value of SWIFT depends on the number of banks that use it. To that end, the cooperative seeks to encourage the broadest possible participation by maintaining neutrality. Only Iran, which was already isolated financially, has ever been cut off. The example of Russia could prompt others — such as China — to turn to alternatives, fragmenting the payments system and potentially even undermining the U.S. dollar’s dominance as the global reserve currency. One could even imagine a future in which rival nations turned similar financial weapons against the U.S.

* * *

Western leaders should be wary of going further and ejecting Russia from SWIFT completely. The effect would be utterly indiscriminate: Supplies of Russian oil, gas and other commodities could collapse, foreign creditors would suffer heavy losses, and even Russians who scorned Putin’s actions and sought to emigrate would have to resort to laundering techniques to get their money out of the country. Putin might well interpret such a cutoff as an act of war and respond accordingly.

As the conflict continues, the international community should work together to coordinate more traditional sanctions aimed at an increasing number of Russian banks, which would impose similarly harsh punishment without such dire unintended consequences — and on measures (such as those already announced) aimed at limiting the Russian central bank’s ability to support targeted institutions. Western nations’ desire to do something big and bold is correct, but they — and the U.S. especially — should be wary of taking actions that they’ll regret.

Whether Putin will interpret the Western expulsion from SWIFT as an acto of war remains to be seen, but one thing is clear: on Monday morning, stocks linked to China's version of SWIFT - the Cross-Border Inter-Bank Payments System (CIPS) - exploded limit up.

The reason: at least some in the market are betting that the glory days of SWIFT are coming to an end thanks to the West's own actions, and its replacement is an acronym that very few have heard... for now.

https://www.zerohedge.com/markets/jamie-dimon-warns-swift-sanctions-may-bring-unintended-consequences-can-be-circumvented


While the world plays chess, we have a President that can't even peel an orange.

ALL of this is King Bidas' fault. He closed off our pipelines and gave Putin his. As Commander In Chief, he lead the worst surrender any major military force has ever committed. He has always appeared weak that now, NOBODY respects their might, their mission nor what they even stand for anymore. China taking Taiwan is a foregone conclusion now after King Bidas' response that a "minor incursion" was acceptable.

The DNC is a terrorist organization.

Zimbabwe here we come.
Sunoverbeach Offline
#18 Posted:
Joined: 08-11-2017
Posts: 14,586
Is a vegetarian permitted to eat animal crackers?
- GC
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