SWIFT ban and sanctions against Central Bank: how new restrictions could affect Russia
What does getting cut off from SWIFT mean for Russia
Russia’s central bank made a statement on Sunday morning trying to calm the markets after the imposition of Western sanctions.
Russia’s national regulator said it had enough resources to help banks run smoothly and promised to provide banks with ruble liquidity if needed.
Fighting in Ukraine after the Russian attack, tanks in Kyiv. Russia is excluded by sanctions from the international financial and transport systems. Events, photos and videos
The central bank said that instead of SWIFT, payments to Russia will be processed through the SPFS system, which is the Russian analogue of SWIFT. This system has been developed since 2014, after the introduction of the first sanctions against Russia due to the annexation of Crimea.
The main problem with SPFS is that it can only work in Russia. This system cannot process payments abroad or in foreign online stores.
The closure of SWIFT will hit not only bank customers, but also Russian exports. When there is no SWIFT, it will become almost impossible, for example, to pay for international oil and gas supplies in a banking system that will be paralyzed for international payments. This could drastically reduce the inflow of foreign currency into the country, further weaken the ruble and lead to price increase.
The Central Bank did not comment on another very important restriction that Western countries intend to introduce – the limitation of the central bank’s international reserves.
The Central Bank not only helps banks with liquidity, but sells foreign currency on the market from its reserves in order to protect the ruble. For example, at the end of last week, the Central Bank managed to stop the fall of the Russian currency like this, writes the BBC.
Western countries, on the other hand, want new sanctions to deprive the central bank of this leverage, that is, to limit the international reserves of the central bank so that it can no longer support the Russian currency. Western countries have significant leverage for this, writes the BBC.
The reserves of the Central Bank of Russia consist of highly liquid assets.
Their total volume as of February 1 amounted to 630 billion dollars. Of these, 132 billion is gold. The largest asset is more than 468 billion, it is a currency. This also includes money on deposits in other central banks.
What kind of reserves will be frozen by Western countries and how is still unknown.
But the fact is that if the central bank loses its reserves, it will not be able to support the ruble.
The material was prepared on the basis of the BBC report.