Russia's SWIFT Ban: EU Should Think Twice as It's About to Shoot Itself in Foot, Journo Warns
© REUTERS / CHRIS HELGREN
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The European Commission is seeking to block seven Russian banks from SWIFT with the nation's largest Sberbank and Gazprombank being left off the draft list, writes Bloomberg. The absence of the two banks from the proposal shows the EU is concerned about the consequences of isolating Russia, according to the media outlet.
"Europe buys energy, grain and minerals from Russia. These three commodity articles are not the kind that can be easily found as an alternative. Trade with Russia is today an indispensable element of the economic foundation on which the West relies. SWIFT is a system of international payments. Disconnecting Russia from the SWIFT system will mean the actual cessation of trade," says Recep Ercin, a Turkish economic commentator and journalist.
SWIFT is an acronym for the Society for Worldwide Interbank Financial Telecommunication. It's a global payments system, which is used by over 11,000 financial institutions and companies around the world, across over 200 countries.
According to Ercin, the European Commission's decision to sever Russia from SWIFT is tantamount to shooting itself in the foot, since it will mark the beginning of a very serious payment and trade crisis for Europe.
The disruption of Russia's grain supplies to Europe will lead to a significant vacuum, notes economic commentator. According to the US Department of Agriculture, Russia and Ukraine combined account for one-third of the world's wheat exports and one-fifth of the world's corn. While the US could partially close the gap in Russian natural gas supplies, Washington can't take over Russia's share in grain as well as minerals in the European market, according to Ercin.
"Europe is planning to reduce trade volumes with Russia, but in doing so, it must ask itself as to who will ensure the security and continuity of supplies," the Turkish journalist says.
Economies have become intertwined due to globalisation and Russia plays a very important role in this structure, the economic commentator emphasises. To illustrate his point, Ercin cites the fact that while Turkey accounts for just 1% of all world trade, Turkey's exclusion from the system will create a lot of headaches for European producers over finding raw materials and intermediate goods.
For its part, Russia is in the club of the world's largest economies in terms of gross domestic product (GDP) based on purchasing power parity (PPP).
"Russia's expulsion from the SWIFT system will mean a very serious payment and trade crisis for Europe," says Ercin. "Perhaps, initially it will not affect the US and the UK that much, but it will directly affect Germany, France, Italy, the Balkans and the Baltic countries. Europe is already stifled by high inflation, and it should think twice how it will handle an additional spike in prices. Ultimately, Europe has no scenario under which it can afford not to buy Russian natural gas."
Piping systems and shut-off valves are pictured at the gas receiving station of the Nord Stream Baltic Sea pipeline, in Lubmin, Germany.
© Sputnik / Dmitrij Leltschuk
/ As the US is gradually losing its dominance, the world's emerging economies are moving towards multipolarity, according to the journalist. After the global financial crisis of 2008, developing economies started diversifying their trade ties more actively. Ercin notes that the global financial system is about to reach a new turning point associated with the formation of a new world order and the impact of the COVID pandemic. "Disconnecting Russia from SWIFT will accelerate this process, and the West will shoot the global system it has created in the foot," the economic commentator says.
Meanwhile, the Russo-Turkish trade will not be disrupted by Russia's exclusion from SWIFT, Ercin asserts.
"Under new circumstances [Turkey] will purchase [hydrocarbons] through the Russian payment system," the commentator says. "Turkey must sign a comprehensive SWAP agreement with Russia. Our volume of trade with Russia is enormous. For example, there is an integrated banking structure between Russian and Turkish banks. If there is no SWIFT system, our economies will be focused on creating their own joint payment system."
