The US, Canada and key European countries, including Germany, have agreed to remove “selected Russian banks” from the Swift payment system. According to the World Trade Organization, Russia's total exports in 2020 amounted to $ 332.2 billion, while imports amounted to $ 240.4 billion. In 2020, Russia's foreign trade surplus decreased from $ 179.5 billion to $ 91.8 billion due to the pandemic.
According to the World Bank, in 2019, Russia's exports amounted to $ 426.7 billion and imports to $ 247.1 billion. Russia's main trading partners are China, the Netherlands, Germany, Belarus, and Turkey. China, Germany, the United States, and Italy are the main partners in imports.
It should be noted that SWIFT is an international financial structure that allows money to be sent from one part of the world to another without borders. It means the Global Interbank Financial Telecommunication Association. Founded in 1973 and headquartered in Brussels, the system covers 200 countries, with a total of 11,000 financial institutions and banks. More than 40 million messages are sent every day through this system, and trillions of dollars are transferred between companies or governments.
Removal from SWIFT will seriously affect the international payments of Russian companies. Because in this case, Russian companies will face serious difficulties in non-cash payments. This will create difficulties for Russia, especially in the export of strategic products.
Given that the shares of Russia's leading companies are indexed on stock exchanges, SWIFT does not bode well for future entrepreneurs in the north. For comparison, Iran's withdrawal from the system in 2012 meant a loss of one-third of our trade turnover for our southern neighbor. In this regard, the withdrawal from SWIFT will lead to a reduction in Russia's foreign trade turnover, which will lead to a decline in shares of companies.
Economic estimations are that Russian economy will face strict crisis early 2023 if sanctions are kept in the agenda. Russian economy is not in the position to fight with sanctions even for short-term period.
Removing Russia from SWIFT system has already impacted on Russian currency market. The Russian ruble has depreciated sharply against the backdrop of new Western sanctions. The Russian currency has depreciated against the US dollar to the level of 1 dollar 105 rubles. Apparently, if the war continues and sanctions expand, it will not be the last stop for the ruble.
On the other hand, the growing demand for the dollar in Russia will create a shortage of foreign currency. There are already long queues in front of almost all Russian banks. Citizens are trying to take their money from banks. This could have serious negative consequences for Russia's banking sector.
Russia's financial sector has reacted more sharply to sanctions following Russia's decision to withdraw from SWIFT. If the decision to freeze the assets of the Central Bank of Russia is made, it could seriously shake the ruble.
Five days after the start of the war, Western sanctions are already having a serious impact on the Russian economy. It seems that this war will not be cheap for the Russian economy. Two Russian billionaires have already called for an end to the war. Business is seriously wary of a new wave of sanctions.
@ CESD, 2022
Center for Economic and Social Development
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