By Peter Sinkamba
UKRAINE “SPECIAL MILITARY OPERATION” MAY BE THE TURNING POINT FOR THE DOLLAR-DEPENDENT GLOBAL SWIFT BANKING SYSTEM
=========$$$$==========
The new sanctions against Russia announced this weekend includes the exclusion of Russia from the cross-border Society for Worldwide Interbank Financial Telecommunication (SWIFT) international payments system.
Banks conduct virtually all hard-currency transactions via SWIFT. Exclusion from the international payment system SWIFT is considered the sharpest sword that the West could wield as an economic sanction against Russia.
However, excluding Russia from the SWIFT system is a double-edged sword for a number of reasons. First, the economic consequences would not only be serious in Russia, but also in Western Europe. The trade between Europe and Russia is colossal.
Second, the ongoing decoupling of Russia and China from the US dollar would be accelerated. Both countries are already working on competing payment systems.
Russia has developed an interbank messaging system, which now covers about 20% of domestic financial payments.
But most importantly, the new Chinese alternative might allow Russia to conduct most of its trade in yuan rather than dollars.
China’s Cross-Border International Payments System (CIPS), founded in 2015, is still under development and includes only 80 foreign banks. But there is no reason in principle that CIPS cannot be a substitute for SWIFT.
If following the exclusion, Russia successfully shifts all its international trade payments out of the dollar system, the blow to American SWIFT prestige and power would be enormous. Not only that. This could be the beginning of the end of the dollar monopoly in international trade.
Let’s wait and see what happens!