How will Russian Banks Swift Ban Affect You?

How will Russian Banks Swift Ban Affect You?

(Pic from the Internet)

In the wake of Russia’s invasion of Ukraine, the US and its allies have agreed to kick some Russian banks off the Swift secure messaging network.

The Swift system is used by banks worldwide to send and receive millions of financial messages and money transfer orders.

According to cnet, the US, UK, Canada, France, Germany, Italy and the European Commission said they’ve committed to “ensuring that selected Russian banks are removed” from the Society for Worldwide Interbank Financial Telecommunication messaging system. “This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.”

Banning Russian banks from Swift could weaken the American dollar internationally as well as negatively affect US energy exports.

Due to their reliance on Russian oil and gas, Germany and Italy initially resisted removing Russian banks from Swift. The Netherlands, among others, will be affected by the Swift ban.

French Finance Minister Bruno Lemaire called the move the “financial nuclear option”. However, Other experts suggest that the ban from Swift will have less of an effect on Russia than economic sanctions like freezing funds or banning imports.

In addition to the decision to ban Russian banks from Swift, the EU and US also committed to restricting the Russian National Bank from using its international reserves, making it harder for wealthy Russians to become citizens of other countries and establishing a “transatlantic task force” to ensure enforcement of economic sanctions against Russia.

Notably, Swift isn’t the only option for global payment messaging. It is said that at least 23 Russian banks currently use China’s “Cross-Border Interbank Payment System” (CIPS) and more could easily convert, according to Asia Market.

Some companies told RT that their customers couldn’t make payments all of a sudden. They will have to work out a solution together.

Some companies in the industry have converted to make payments in Chinese RMB. China-based CET told RT that its Russian branch has not been affected at this stage. “CET Russian branch has enough stock as well as support from the headquarters. To us, it is also a chance to seize the local market. We hope the war will end soon and the market gets back on track as soon as possible,” said the spokesman of CET.

Like a rock thrown into the water, the removal of Russian Banks from Swift will have its ripple effects. As to how much it will affect product prices, production and delivery logistics, only time will tell.

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