Ian King, Sky Business Manager
After a wet peak, which was a modest package of sanctions unveiled by Boris Johnson on Tuesday, the last evening’s salvo certainly carried a bit more weight.
As Johnson said, about half of Russia’s trade is currently in U.S. dollars and British pounds, which will have an impact.
The Prime Minister mentioned the exclusion of Russian banks from SWIFT, the international communication and messaging system used by more than 11,500 banks in 200 countries around the world, which would be another difficult option.
Mr Johnson has argued that this move has not been rectified, but apparently not everyone agrees. This was pointed out by Johnson’s specific reference to “G7 unity” and, given that Germany opposes the measure, this will by no means happen.
This is because Russian banks are deeply involved in the global financial system and this would undoubtedly have consequences. For example, it would prevent Russian gas supplier Gazprom from receiving payments from Western customers, especially Germany, for its gas.
This could become academic if the Western Allies impose an embargo on Russian energy exports in the coming days – but this is undoubtedly a factor influencing German thinking.
It is also by no means clear that the expulsion of Russian banks from the SWIFT system would have the same effect on the Russian economy as it had when Iranian banks were excluded from the system in 2012.
It used to be. When Russia annexed Crimea in 2014, then-Finance Minister Alexei Kudrin said expelling Russian lenders from SWIFT would reduce its GDP by 5% as it would damage its trading ability.
Since then, however, Russia has developed its own financial transfer system, called the Financial Messaging System (SPFS), which allows it to continue to facilitate payments – although it is believed to be mostly domestic and with non-Western trade. partners.
More sanctions and penalties against Russian oligarchs and corporations may be needed in the coming days and weeks.
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