SWIFT Has Little Chance Without Russia

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Sometimes we get truly amazing news from the financial sphere… Was it long ago when the British PM Cameron scared Russia with the most terrible of all «sanctional punishments» — cutting Russia off the international bank transfer system SWIFT? And not only he tried to scare Russia, but also made it clear that such measure would be tantamount to an «economic nuke», after which the economy of our country would be «torn to shreds». Only a few months passed, and here you are: «The international system SWIFT will include a Russian representative in its Board of Directors». What a turnaround! However, there’s hardly anything surprising about it. The sudden and unexpected warming of the «European partners» on the «SWIFT issue» has quite logical explanations, both in the objective and subjective terms. Objective circumstances can be narrowed down to the fact that the volume of payments passing through the SWIFT system has increased significantly — the Russian Federation rose to the 13th place in this indicator among the «shareholders of this financial company». — Russia increased its share to the level which allows it to submit its representative to the Board of Directors, — commented the executive director of the «RosSWIFT» association Roman Chernov. Therefore, according to the SWIFT rules, the representative of Hong Kong will have to vacate his seat to a Russian at a SWIFT meeting which takes place once in three years. However, this is what should be done according to the rules.. According to the rules of the private company SWIFT, no one can be disconnected from the system, but… We’ve already managed to see it for ourselves that if you want it really hard, it’s still possible. Iran, for one, was disconnected a while ago… Still, if someone wanted to break the rules, then nobody would’ve called the Russians to join the Board of Directors, not speaking of other things. However, Russians were invited, and this means that subjectively it was decided so. But why? Well, first of all, it was because the insidious Russians didn’t stay inactive, and in December 2014 launched their own system of internal electronic payments, which works along the SWIFT standard. This already precluded the «tearing of Russian economy to shreds». Secondly, the Russian leadership made a transparent hint to the international community, that should international electronic money transfers get blocked, then it would be impossible for Russia to transfer its money out of the country… which would be a much more painful thing for its arm-twisting «partners», than for the Russians themselves. And thirdly, China has just started testing CIPS, oreiented towards making international transfers in yuans, but also allowing transfers in other currencies. And Russia also started trading yuan-rouble pairs. The latter fact is especially important. These days there are a lot of inter-bank transfers in different currencies are made via dollars or euros not because it’s more convenient, but because that’s how «it should be». It is precisely SWIFT with its convenience of transactions which forces the banks of, say, India convert their rupees into roubles via dollars. The destruction of the SWIFT monopoly will inevitably lead to the emergence of a multitude of non-dollar mutual transfer systems. There are already several examples of this: when several years ago our «partners» disconnected Iran from SWIFT, the Persians found a way out: Turkey became their transfer center, and through its banks the bulk of Iran’s mutual transfers with other countries was made. This was hardly convenient for the Iranians, but didn’t cause any serious problems for them either. Moreover, one can say that SWIFT is in fact far from a monopolist in the area of financial transactions. The system only increases their speed — and gets its money for it… which isn’t going to be paid by everyone unquestioningly. For example, in Germany the majority of its citizens get their wages transferred to Maestro bank cards, which are only connected to the exclusively German money transfer system V PAY. In small German towns you are hardly able to find a store or a petrol station where you can pay with your VISA or MASTERCARD. This way the Germans quietly and without any issues pushed the Americans off their market. If it suits them, they will disconnect themselves from SWIFT in a way no one will notice it… in Germany, of course. But the transaction centers of SWIFT will definitely notice it, and quite painfully so! They will notice it because the balance of the modern financial model is held up by the concept that everything is unshakable and nothing else is possible. However, should a monopoly be destroyed in one sphere, the system would collapse like an avalanche. Therefore, Russia’s disconnection from SWIFT could’ve become a very serious push for much more large-scale events in terms of de-dollarisation of the world system with all that follows from it. It seems like the international financial circles could foresee such eventuality and decided to «appease» Russia while it wasn’t too late. Otherwise it might have turned out the same way as with the «South Stream»: they kept scaring and putting spokes in the wheels, and… the gas started flowing from Russia to Turkey. Just like the financial flows though it… This is what they fell like they should avoid, but the word has already been let out, and this is why the Russians have a skeptical view of their prospects with SWIFT: «The threat of disconnection from SWIFT isn’t reduced after the inclusion of a Russian representative in its Board of Directors. But the presence of our man in the Board means we can influence the decisions taken by SWIFT in terms of adopting new standards, improvement of service, tarriff policy» — said the Chairman of the «National transaction council» non-profit partnership Alma Obayeva, commenting on the forthcoming change in the Board of Directors. Here’s to you, Mr. Cameron. And next time think twice before trying to scare us.

This article originally appeared at politrussia.com. Translated for South Front

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