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A quick breakdown of what SWIFT is and why it matters

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Re: A quick breakdown of what SWIFT is and why it matters

#31

Post by celticninja »

baybal2 wrote: post #14
xenocratus wrote: post #10

Earlier quoted context omitted.

I'm way too far away from power on anything like this so I might be terribly wrong, but I imagine that cutting off SWIFT might convince other countries doing bad things to consider adhering to Russia's system, if they see the West willing to cut them off as well. You then get fragmentation and SWIFT losing some of its "soft power".

Russia already uses multiple alternative settlement systems with China, Iran, and few other buddies like Norko, and Belarus. > You then get fragmentation and SWIFT losing some of its "soft power". This already lost any power it had in 2014, because the threat of disconnection was wasted. An honestly, EU lost its face now to talk "soft power." Every foreign head of state going to meet EU bureaucrats will now look at t…

It's still an effective sanction because the Russian alternative is a half baked approach. It can only handle a fraction of the daily required transactions, only 40% of Russian banks are signed up to use it and it can only process payments during office hours.

Re: A quick breakdown of what SWIFT is and why it matters

#32

Post by rcpt »

chiefalchemist wrote: post #18

IDK. In an interconnected global economy my sanction of you hurts you, but it hurts me as well. For example, the higher price of oil is good for Russia and OPEC, but not the rest of us.So where is the pain? Certainly there are things that Russia has that the West needs. In addition, if Russians are generally used to less - and the West isn't - then again where is the pain? After two years of pandemic are most America…

To be honest high oil prices would be a godsend.

Re: A quick breakdown of what SWIFT is and why it matters

#33

Post by abhishekjha »

espadrine wrote: post #20
gruez wrote: post #7

>Russia has also been building an in-house system since 2014—the last time SWIFT cutoff was threatened—which may mean they are able to temper some of the impact a cutoff would have on its economy. If they're building a replacement, doesn't that also mean we should use "cut off SWIFT" now, rather than later when it'll be ineffective?

> If they're building a replacement, doesn't that also mean we should use "cut off SWIFT" now, rather than later when it'll be ineffective? The replacement is already functional. In fact, Russia is not the only one having built a replacement to protect against the risk that SWIFT would be sanctioned: Europe has done it too with Instex: https://instex-europe.com/about-us/ SWIFT is a private company; those sanctions ma…

India has UPI and Rupay which is getting adopted by other SEA countries. Nepal is as another addition.

Re: A quick breakdown of what SWIFT is and why it matters

#34

Post by jaywalk »

TekMol wrote: post #26

I often wonder how money is stored. It can't be just a number on a computer in a bank, right? Otherwise some Russian bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping.". So I guess USD needs to be recognized by the US somehow? Could the US simply "void" all USD that are owned by Russia?

It's mostly just numbers on a computer in a bank. There are regulations concerning what banks can do with those numbers, but it all boils down to people having faith in the system in the end. That's why bank runs can quickly lead to economic disaster.

Re: A quick breakdown of what SWIFT is and why it matters

#35

Post by MatteoFrigo »

TekMol wrote: post #26

I often wonder how money is stored. It can't be just a number on a computer in a bank, right? Otherwise some Russian bank could just increase that number to whatever they like. And say "Look, we own 100 Trillion USD. Now let's go shopping.". So I guess USD needs to be recognized by the US somehow? Could the US simply "void" all USD that are owned by Russia?

> I often wonder how money is stored.

The Bank of England published a summary of how modern banks work. See https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

> It can't be just a number on a computer in a bank, right?

It can and it is, see the BOE paper.

> So I guess USD needs to be recognized by the US somehow?

This is a complicated question that will start a flamewar, but basically, any bank in the world can create dollars out of thin air given adequate collateral. Read about "Eurodollars".

Re: A quick breakdown of what SWIFT is and why it matters

#36

Post by mohanmcgeek »

User23 wrote: post #15

Interestingly SWIFT was used to effectively depose a Head of State already, specifically Pope Emeritus Benedict XVI. The Vatican's Bank was banned from the system and allowed back on after Benedict's resignation. The lesson was not lost on Russia or China and they have been building an alternative system called BRICS. Edit: Here's a contemporary source[1] from a "reputable" newspaper. It doesn't mention SWIFT by name…

BRICS is not an alternative to SWIFT. Russia, India, China -- the RIC -- in BRICS are each working on/have their own SWIFT like system.

There's a BRICS bank though.

Re: A quick breakdown of what SWIFT is and why it matters

#37

Post by sega_sai »

All these sanctions are a bit of the joke when you are dealing with an insane leader in a country without elections and sitting on top of a pile of reserves. And the west is not doing one thing that could actually actually make a difference -- cutting oil and gas export because the west thinks it'll be too expensive for the west.

I feel these sanctions are still more of signalling, than actually doing something useful to help Ukraine.

Re: A quick breakdown of what SWIFT is and why it matters

#38

Post by nwatson »

chiefalchemist wrote: post #18

IDK. In an interconnected global economy my sanction of you hurts you, but it hurts me as well. For example, the higher price of oil is good for Russia and OPEC, but not the rest of us.So where is the pain? Certainly there are things that Russia has that the West needs. In addition, if Russians are generally used to less - and the West isn't - then again where is the pain? After two years of pandemic are most America…

> Per [sic, "pre-"?] invasion Putin was effectively saying "Russia can't trust The West. They're out to get us" ... Biden follows that with "Lookout Vlad...we're gonna put a hurting on Russia."

Between those two (in-effect) statements, first from Putin, second from Biden, was Russia's/Putin's invasion of Ukraine. No irony there, just cause and effect.

Re: A quick breakdown of what SWIFT is and why it matters

#39

Post by pmontra »

baybal2 wrote: post #14
xenocratus wrote: post #10

Earlier quoted context omitted.

I'm way too far away from power on anything like this so I might be terribly wrong, but I imagine that cutting off SWIFT might convince other countries doing bad things to consider adhering to Russia's system, if they see the West willing to cut them off as well. You then get fragmentation and SWIFT losing some of its "soft power".

Russia already uses multiple alternative settlement systems with China, Iran, and few other buddies like Norko, and Belarus. > You then get fragmentation and SWIFT losing some of its "soft power". This already lost any power it had in 2014, because the threat of disconnection was wasted. An honestly, EU lost its face now to talk "soft power." Every foreign head of state going to meet EU bureaucrats will now look at t…

To be fair, it's not only heating. It's power plants and gas to keep many factories working. Think about ovens of all sorts and all industrial processes that need a lot of electricity. But yes, it's the n-th loss of face of EU. It's not much about EU bureaucrats but about EU head of states, prime ministers, etc. which ultimately decide what bureaucrats do. On the other side of the ocean, if the USA let Putin go too far they risk losing part of their empire [1] which is always bad for business.

[1] https://en.wikipedia.org/wiki/Empire#Present

Re: A quick breakdown of what SWIFT is and why it matters

#40

Post by dgan »

celticninja wrote: post #31
baybal2 wrote: post #14

Earlier quoted context omitted.

Russia already uses multiple alternative settlement systems with China, Iran, and few other buddies like Norko, and Belarus. > You then get fragmentation and SWIFT losing some of its "soft power". This already lost any power it had in 2014, because the threat of disconnection was wasted. An honestly, EU lost its face now to talk "soft power." Every foreign head of state going to meet EU bureaucrats will now look at t…

It's still an effective sanction because the Russian alternative is a half baked approach. It can only handle a fraction of the daily required transactions, only 40% of Russian banks are signed up to use it and it can only process payments during office hours.

Processing only during office hours? That's hilarious. Is there someone manually debugging transactions, and that's the reason?
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