Swift is the international money transfer system that most banks in the world are part of. It enables trade and trouble-free transfer across national borders – ie the transfer of money between banks in different countries.
Swift is owned by thousands of organizations that are also users of the system. It was established in the 70’s and is headquartered in Switzerland.
38 million daily messages
Swift stands for “Society for Worldwide Interbank Financial Telecommunication”. In practice, there is a secure messaging system, which makes it safe to transfer money across national borders.
In 2020, 38 million so-called “fine messages” were sent via Swift every day, according to Reuters. Trillions of dollars are transferred annually through the system.
The system makes it possible to rely on instructions and assignments, without time-consuming documentation, and is the only effective way to conduct international trade.
Will isolate Russia from the global economy
The new sanctions, which are coordinated between the EU, the US, the UK and several other countries, are part of a plan to isolate President Vladimir Putin and Russia from the world economy.
– These measures will significantly damage President Vladimir Putin’s ability to finance his war. They want to undermine the economy. Putin has set himself the goal of crushing Ukraine, but at the same time he is destroying his own country’s future, von der Leyen stated.
No one can be sure of the long-term effect. The goal is to hit President Putin and the circle around him, so the authorities in the same countries have also decided to freeze the private funds of Putin, Foreign Minister Sergei Lavrov, and several sugar-rich oligarchs.
Excited on Monday
Little is known about what Putin really owns in terms of values, but there have been rumors for many years that he is worth over $ 100 billion. The values are managed through shell companies, and oligarchs in his inner circle, as well as family members, help to hide the actual ownership structures.
The Central Bank of Russia raises the key interest rate to 20 percent. After the stock markets opened on Monday, the ruble has plummeted, and sanctions against Russia are beginning to show financially. Earlier in February, the key policy rate in Russia was also adjusted upwards, then to 9.5 per cent.
This was before it was decided to throw Russia out of the Swift system. The markets are now eagerly awaiting what will happen when the stock exchanges open on Monday morning.
The Russian central bank is trying to calm the markets internally before the first day after the news of the ban. “The central bank has the necessary resources and tools to maintain financial stability,” they write in a press release Sunday.
– These measures will hit Russia very hard. It will destroy Putin’s ability to build Russia as an even stronger military power, says Foreign Minister Anniken Huitfeldt to TV 2.
To Today’s business On Sunday, BI professor of economics, Hilde Christiane Bjørnland, said that she expects the sanctions to have a strong impact on the Russian economy within a short time.
– BI-PROFESSOR: Hilde Christiane Bjørnland. Photo: BI
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– The negative consequences of the sanctions will be effective as early as Monday, Bjørnland says to TV 2.
She has no doubt that there will be major changes in the Russian market this week.
– It is difficult to say what will happen immediately when the market opens, but it is clear that the sanctions are a very negative news with potentially large and crippling effects on the Russian economy. The market will react negatively. And so will the exchange rate, which we can expect to weaken sharply.
Furthermore, Bjørnland points out that the world community still has instruments that can paralyze the Russian economy even harder.
– It is possible to impose several sanctions. Several banks may be affected, and it is also conceivable that restrictions will be introduced on the sale of raw materials such as oil and gas. It has not been done until now.
– Historical
One of America’s foremost experts on sanctions, Daniel Tannebaum has worked with similar issues for over 20 years. He calls the sanctions against Russia historic.
“Sanctions have never been introduced against such a large economy that has been so intertwined with the world economy,” he told TV 2.
However, he is not sure that the sanctions will change Putin’s behavior. He also believes it will be difficult to go after Putin’s hidden wealth.
– The question is how much the Russian economy can withstand, says Tannebaum.
He believes it would have been even more effective to sanction the largest Russian banks than Swift.
– If you sanction the entire bank, you stop all transfers to that bank. If you “de-swing” Russia, you can still trade with the banks through other channels, says Tannebaum, to TV 2.
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