According to a report just released by AP, Europe, Canada and the United States have just agreed to exclude Russia from the SWIFT banking system. If true, it would be a major step in the sanctions against Russia. However, what has been omitted from these reports is that this only applies to “selected” Russian banks.
If true, that would be halfway support, and it could mean that the same countries that put such restrictions in place are actually funding the Russian war machine out of selfish motives.
What the fine print says is that all Russian banks that were sanctioned will now be cut off from the SWIFT payment system. Also added in small print: if necessary, other Russian banks could be added.
With Russia being the fifth most powerful trading partner, a complete shutdown would mean a collapse of the Russian economy, but it will have collateral consequences that countries don’t want to deal with.
Earlier today, a comment posted by Max Borowski of the German 24/7 news service NTVexplains why Europe and the United States do not agree to disable the SWIFT bank payment system for Russia as part of the sanctions implemented.
Failing to do so, his comment further explores why that means the US and Europe are still funding Putin’s war machine – and there’s a good, selfish reason.
Why and how?
Big banks and Russian oligarchs are now on a US embargo list, but Russia is still out for big money. Russia has probably made sales of more than several billion US dollars in the last three days alone, which is why Ukrainians are dying and fleeing in their attacked country. Fuel estimated to be worth more than a billion dollars went to Western countries, including Germany.
According to the report, revenues have likely increased since the attack, as commodity prices rose sharply when the war broke out, while export volumes remained the same. This is according to data from gas line operators in Europe.
Due to rising gas prices, Russia saw a 60% year-on-year revenue increase in December 2020, thanks to the commodity boom.
Of course, other sectors of the Russian economy could be hit hard, but Russian President Vladimir Putin could easily deal with it, as long as this financial windfall continues. The German government and other governments know this.
After much hesitation, German Foreign Minister Annalena Baerbock and Economics Minister Robert Habeck have now announced that they will agree to specific restrictions on Russia’s connection to the SWIFT payment system. However, they ensured that “collateral damage” in the energy sector in Western Europe was avoided.
This means that Putin’s main source of income will continue unless he is completely cut off from the SWIFT system.
According to the NTV report, there are two arguments for this exception, which is not an exception, but a reversal of the sanctions. The German federal government mainly cites damage to the local economy and consumers. It is a serious argument.
Europe is not prepared for a complete abandonment of Russian oil and gas supplies. Energy prices would increase dramatically and put considerable pressure on businesses and citizens.
What this does not mean by this assessment is that the Germans should freeze.
Above all, stopping energy exports is probably the only way to hit Putin so decisively that his grip on power is in jeopardy and he might be ready to give in.
In the best-case scenario, a solution could be found before next winter through swift and severe sanctions instead of prolonging the conflict with ineffective punitive measures.
In recent days, the US government – in addition to the fear of higher prices for domestic consumers – has tried another argument in favor of exempting energy from sanctions.
Russia reliably supplies the United States with several hundred thousand barrels of oil per day.
In return, the United States also helped finance Putin’s war machine.
If this agreement were stopped, argued the US State Department, prices would rise even more. Putin would find buyers on the world market willing to pay these prices and further increase his income.
This US government calculation has several weaknesses.
Including the energy sector in the financial sanctions and completely excluding SWIFT Russia from the global market would largely cut it off.
Even if China and some other countries continue to buy Russian oil, Russia will not be able to recoup the losses.
Not all of the financial flows associated with Russian commodity exports could be adequately processed using cryptocurrencies, Russia’s own payment system, or other payment alternatives.
The crucial question is:
Are the governments in the United States, in Europe ready to make sacrifices and take risks themselves to stop Putin?
Apparently, after Kiev was attacked from all sides, this is now being put in place to make an effective difference in Russia’s abilities to finance its war machine.
If the case is not worth it for the United States, Canada, the United Kingdom and the EU, they should at least say so openly and honestly, instead of shouting solidarity with Ukraine, but with limited risk to their own economy. A halfway approach is not possible, if Russia bombs Ukraine with only days to succeed.
Apparently that has now changed.
Real and effective action may not be without pain, and elections are always a threat in the United States, Europe and other democratic countries. Rising energy prices, inflation and supply shortages are not good for re-election.
CONCLUSION: The collateral damage will be Ukraine and its brave people.