In order to challenge dollar’s dominance in international market and quell the effect of economic sanction, Russia has successfully developed and implemented an alternative banking systems.
According to reports, it is first-of-a-kind attempt to develop a substitute to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) code, which is the current financial backbone West-led money transaction system, dealing with $6 billion transactions daily.
The report also mentioned that in the face of western sanctions, Russia’s largest vulnerability is in its banking sector, which for better or for worse is tied to the hip with international banking.
If Russia wishes to maintain the status quo, there’s not much that can be done about this dependency. Being cut off from the SWIFT after sanctions were announced in 2014, Moscow set out to prepare for the worst-case scenario alternative system. In the face of that sanction, Russia has been clamoring to figure out how to get on with life without Europe and the United States.
In layman’s terms, SWIFT allows for fast and (allegedly) secure international financial transfers. In fifty years when you are able to use your Bank of America debit card on the Moon (for a low fee of 2,000 moon rubles), it will be because of SWIFT or a system similar to it.
There are two issues surrounding SWIFT “cut-off” for Russia: the first, is it likely to happen? The reality is that Washington’s European poodles realize that cutting Russia from SWIFT would be a disaster. In 2015, European Central Bank policymaker Ewald Nowotny “warned against kicking Russian banks out of the SWIFT payments transfer system as part of tighter sanctions on Moscow.”
Of course, this hasn’t stopped Europe and Washington from threatening to pull the SWIFT plug.
We have a very low opinion of European and American geopolitical strategy; that being said, we have a hard time believing that Washington would seriously go forward with axing Russia’s access to SWIFT.
If it did though, things would certainly get interesting. Which leads us to our second issue: Is Russia prepared?
In the short-term: Definitely not. In the long-term it could be one of the best things to ever happen to Russia and all other nations that are tired of Washington’s economic and military shenanigans.
The alternative system is far from fully functional, however: “It doesn’t work from 9pm to 5am Moscow time and costs up to five cents per wire transfer, which is regarded expensive.”
And using Crimea as an example (Western banks refuse to transfer foreign currency payments from Crimea via the SWIFT transaction system), there would be numerous headaches that would likely last a very long time.
For Washington, any short-term gains from cutting Russia off from SWIFT would almost certainly be followed by long-term economic and strategic benefits for Moscow.
We know this because every attempt to “sanction” Russia has had a similar result.