Still, sanctions experts said that SWIFT was often overhyped as a tool and that cutting access could actually backfire by forcing Russia to find alternate ways to participate in the global economy, including forging stronger ties with China or developing a digital currency.
Russia’s Attack on Ukraine and the Global Economy
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A rising concern. Russia’s attack on Ukraine could cause dizzying spikes in prices for energy and food and could spook investors. The economic damage from supply disruptions and economic sanctions would be severe in some countries and industries and unnoticed in others.
The cost of energy. Oil prices already are the highest since 2014, and they have risen as the conflict has escalated. Russia is the third-largest producer of oil, providing roughly one of every 10 barrels the global economy consumes.
Gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. Natural gas reserves are running low, and European leaders have accused Russia’s president, Vladimir V. Putin, of reducing supplies to gain a political edge.
Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Financial turmoil. Global banks are bracing for the effects of sanctions designed to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.
Emily Kilcrease, a senior fellow at the Center for a New American Security, argued that such an action could accelerate Russia’s efforts to expand the use of its own financial messaging service and drive it closer to China.
“There’s also this longer term question about whether de-SWIFTing in and of itself is just creating a lot of bad incentives for Russia,” Ms. Kilcrease said.
Michael Parker, counsel at the law firm Ferrari Associates, suggested that blocking Russia from SWIFT would probably open the door to other workarounds, including finding alternative communications systems. A more effective first step, he said, would be to impose the type of bank sanctions Mr. Biden announced on Thursday.
“To actually cut Russia off from the U.S. banking system or the global banking system, the Russian banks would have to be sanctioned. And that’s what they did,” he said. “At the end of the day, this is a financial tool — hitting their major banks is about as far as we probably could reasonably go as far as a first line of sanctioning.”
Emily Flitter contributed reporting.
Article source: https://www.nytimes.com/2022/02/24/business/russia-swift-financial-system.html
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