How badly will Russia be hurt by the new sanctions?



Excluding Russian banks from Swift and the Russian central bank from international operations has, up until now, been considered a last resort.

Shutting it out of Swift, the international payment system, creates potentially substantial collateral damage for companies and financial institutions owed money – either now or in longer term financial contracts – by Russian counterparties.

In 2018, America managed to force Swift to ditch Iranian banks but even that was a far smaller economy and was opposed at the time by most European governments.

Germany is particularly sensitive as it has relies on Russia for two thirds of its gas supply. It also feels it has already “taken one for the team” by suspending the certification of the Nord Stream 2 pipeline, built to transport gas from Russia to Germany.

Authorities in US, Europe and the UK appear to have agreed a way to minimise these vulnerabilities by excluding the banks least involved in energy transactions or finding a way of filtering transactions to allow through energy and food payments.

The details of how they will do this have not been disclosed.

Although it would be very disruptive to Russia, there is an alternative system called SPFS – or System for Transfer of Financial Messages – that Russia set up after Crimea in 2014.

China also has a secondary system called the Cross-Border Interbank Payment System or CIPS.

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