Russian banks have been blocked from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payments systems following a decision by Western countries as an additional sanction to try and pressurize Russia to cease invading Ukraine, without a doubt, the blockage of SWIFT payments will indeed inflict a huge blow to the Russian economy.
SWIFT is a secure messaging system to ensure rapid cross-border payments which have become the main mechanism to finance international trade. Following these development Russian banks will now find it hard to communicate with its peers across the word enen those in friendly countries like China.
This ban targets some certain Russian banks with a sole aim trying to weaken Russia’s central bank so as to curtail its ability of supporting and cushioning the war. Banking experts believe this measure will come with a significant effect.
“What will I be watching for? The names of the “selected” banks. If the banks include the big fish—Sberbank, VTB, and Gazprombank—this is an absolutely huge deal. Let’s wait and see,” tweeted Edward Fishman, an expert on economic sanctions.
The impact of this move is likely to be a hard one on the Russian economy and markets. The sanctions will indeed crumble the Russian economy to some extent.
“This is the end of a significant part of the economy. Half the consumer market is going to disappear. These goods will disappear if payments can’t be made for them,” said Sergey Aleksashenko, a former deputy chaiman of the Russian central bank.
The French Finance Minister, Bruno Le Maire, has applauded this move terming it as a ‘financial nuclear weapon’ further adding that when you have a nuclear weapon in your hands, you think before using it.