EU Threatens Russia with Global SWIFT Payment Network Disconnection
- Another decoupling between East & West
- EU claiming “Ukrainian Society”
- SWIFT disconnection would hit all Russians overseas
- Comes when US and China are also disconnecting
Over 50 European Parliament lawmakers tabled a resolution yesterday (Wednesday April 28) proposing disconnecting Russia from the SWIFT payment system and halting the purchase of Russian oil and gas supplies if Moscow’s alleged “aggression and continued destabilization of Ukraine, hostile behavior towards and outright attacks on EU member states and societies” escalates into military action.
In a draft resolution tabled on Wednesday “on Russia, the case of Alexei Navalny, the military build-up on Ukraine’s border and Russian attacks in the Czech Republic,” the group of mostly Eastern European lawmakers suggested that if the current tensions over Ukraine turn into an outright Russian invasion, imports of “oil and gas from Russia to the EU must be immediately stopped, while Russia should be excluded from the SWIFT payment system, and all assets in the EU of oligarchs close to the Russian authorities and their families in the EU need to be frozen and their visas cancelled.”
The resolution goes on to blame Moscow for the deterioration of the security situation in eastern Ukraine and criticizes Russia for suspending “the right of innocent passage for warships and commercial vessels” through the Kerch Strait until 31 October. That measure was adopted after US and British warships were originally deployed to the enter the Black Sea – they have since turned back.
European Union foreign policy chief Josep Borrell has stated that relations between Moscow and Brussels were at a “low point” and could deteriorate further in the future. Borrell accused Russia of “pretending” to be a neutral mediator in the conflict in eastern Ukraine, and claimed Moscow was not interested in the realization of the Minsk agreements.
Under the terms of the Minsk accords, signed in early 2015 in the Belarusian capital after months of brutal fighting between Kiev forces and militias in the regions of Donetsk and Lugansk, the breakaways would return to Ukrainian jurisdiction in exchange for broad autonomy. The two sides made good on their promises to halt fighting and move heavy military equipment away from the line of contact, but the agreement’s implementation has since been stalled, with Ukrainian lawmakers refusing to proceed with the legislation to grant the Donbass autonomy.
The reference to “hostile behavior towards and outright attacks on EU member states and societies” by the EU concerning the Ukraine will not sit well with Moscow – the Ukraine is not an EU member and it will further suspicions by Russia that the situation is part of an EU-NATO plot to influence territory previously part of its remit away from its sphere of influence. The Ukraine has traditionally been a major agricultural source of food for Western Russia.
The vast majority of East Ukrainians are ethnic Russian rather than Ukrainian and supportive of Moscow. They have been subjected to intimidation by Kiev for not following Kiev’s pro-EU stance and rather as in the situation in Crimea, suffered because of lack of infrastructure and social investment. Kiev also wishes to join the EU and NATO, the latter a situation that Moscow will not tolerate as it brings US, and NATO military capabilities close to Moscow. Moscow instead, given its experiences in two World Wars, wishes to retain a ‘buffer region’ between it and the United States. Moscow also wishes to protect ethnic Russians.
The EU meanwhile has expansionist tendencies and sees the Ukraine as a potential breadbasket. Historically the country has veered from being part of various European Empires before being part of the Islamic Ottman Empire prior to being annexed by Catherne the Great’s armies in 1774, when it became part of the Russian Empire, a situation that continued under the USSR and civil war that resulted in West Ukraine being subsumed by Poland (now an EU member). The resulting country, half its previous size, remained part of the USSR until its demise in 1991. Since then, it has retained independence although veering between political alliances between Brussels and Moscow. That continuing struggle – now 30 years old – is a main source of conflict between Russia, the EU and NATO – with some vested interests preferring there is no resolution.
Cutting Russia off from the SWIFT banking network would impose a huge amount of inconvenience on Russian nationals reliant in any way upon international money transfers. It would cut off all business and trade ties with the EU and United States, with suffering being inflicted on Russian nationals and relatives overseas being unable to access remittances sent from Russia.
It would usher in further moves to tie Russia to China and Asia and hasten the development of alternative payment systems from SWIFT – which are already under development by Moscow and Beijing.
It would also, in conjunction with the US decoupling from China, bring forward the rapid likelihood of a new cold war seeing a definitive split between East and West.
- Russia, Other Countries Abandon SWIFT Payment Network And Establish Alternatives
- Next Up in Global Decoupling: The US Strategic Competition Act 2021
Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at email@example.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.