BAKU, Azerbaijan, March 1
By Leman Zeynalova – Trend:
Russian banks account for 1.5-2 percent of flows, the sixth largest globally, on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) service, Trend reports with reference to the UK-based Capital Economics research and consulting company.
Overall, it appears that Russia’s banks have few viable alternatives to SWIFT when it comes to cross border transactions, says the company.
“West is working on a carve out for energy trade when it comes to its actions related to SWIFT. It appears that the first step in this regard will be to see if it is possible for SWIFT to distinguish between those transactions that are related to energy and others. If that is not possible, then it appears that those banks that are heavily engaged in Russia’s energy trade will not be excluded from SWIFT. That is the path that the West has resorted to with other banking-related sanctions. For example, Gazprombank – a key conduit for Russia’s oil and gas trade – has so far avoided being caught up in the most severe Western sanctions announced in the past week,” reads a report released by Capital Economics.
The report says that in practice, however, there is still likely to be some disruption to Russia’s energy trade.
After all, there appears to be some “self-sanctioning” taking place as companies do not want to be seen purchasing Russian energy products. Credit Suisse and Societe Generale have halted financing of all commodities from Russia.
“In so far as Russia’s (non-energy) trade with the rest of the world is cut off, that could lead to severe strains on Russian corporates that are dependent on international trade for their revenues and, as a result, they may struggle to service their debts. One key unknown at this stage is how the SWIFT sanctions will affect companies and the sovereign’s ability to make external debt repayments. More generally, the latest ratcheting up of sanctions has triggered a further sell-off in Russia’s financial markets. The equity market hasn’t opened today but, at the time of writing, the ruble has dropped by around 15 percent. The central bank has hiked its policy rate from 9.5 percent to 20 percent and the broader tightening of financial conditions will weigh on domestic demand in Russia,” said Capital Economics.
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