New Nuke Of New Cold War

Editor's letter

Sanctions by cutting SWIFT for Ukraine

Sanctions by cutting SWIFT for Ukraine

In this swift century our adversaries might not need another 20 years to develop a new world of financing, considering the demand for financial services outside the reach of over regulation by big brother. Before it’s too late, it may be time to play the SWIFT card to avert many atrocities like land or ship grabs in Ukraine.

In the aftermath of Russia gulping Crimea and practically blocking the UN security Council, the US begun imposing unilateral sanctions without the watering down effect of its formal allies and unearthed unfettered prospects of haute couture tailored measures, which evolved into an efficient and precise device.

As a result, the US has discovered that codes to the new nuclear red button aren’t stored in a briefcase anymore but, rather, the tiny Belgian village of La Hulpe, in the hands of Yawar Shah. Ironically, Shah is the name of the chairman of The Society for Worldwide Interbank Financial Telecommunication (SWIFT), a financial information service that provides international transfers.

SWIFT is subjected to Belgian and European laws, but its board includes executives of US banks, allowing them to effectively regulate over 11,000 financial institutions in more than 200 countries and territories. The power of fast and furious financial sanctions opened up the whole new world of possibilities for the US to command and steer the world via shepherding the world’s high-value financial transactions.

Whenever a new set of sanctions is cooking in the ovens of DC, the only chilling fear that riddles through the Russian elites and temporarily freezes the markets, investment and growth inside the country, is the prospect of being cut off from SWIFT. The large export-sustained economy could be substantially paralyzed should the principal means of financing the regime be disabled.

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The loud sigh of relief and laughter is heard from Moscow’s upper echelons when the new sanctions emerge, yet again leaving their SWIFT access intact. All the ancillary blows, like denying visas, seizing properties in London and Miami or effectuating proxy acquisitions of sanctioned assets to mask dealings, are mere bruises to excessively and publicly overcompensated oligarchs.

In the short term, a weakened by sanctions ruble boosts Russian exports and helps gigantic natural resources companies—read Putin—that sell in dollars while investing in rubles. Putin’s response by banning food imports from the West resulted in Russia now exporting more agricultural products than it does weapons. Sanctions are also a bliss for domestic propaganda that thrives on uniting the nation on an anti-West narrative of a besieged-by-enemies homeland.

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Just as in the old Cold War with nuclear retaliation, Russia realizes its newest, biggest modern fear: losing SWIFT access, i.e. revenue, along with utter lack of an adequate response, as a ban on ruble transactions would be comical. And, like with its nuclear proliferation back in 1949, Russia has begun building a “bomb” of its own—a SWIFT substitute, which launched operations in 2017 and grew to 400-plus domestic members currently. So far, the Russian System for Transfer of Financial Messages (SPFS) has been susceptible to cyber-attacks but is reportedly about to implement block chain technology and set to integrate in 2019 with the relatively well-established cryptocurrency platform Ethereum, which will leap it ahead of SWIFT in reliability and security.

Meanwhile the EU, tethered by the US reaping a massive intelligence from SWIFT and capitalizing on it while violating European privacy protection laws and imposing unilateral sanctions on its trade partners, rebels with its own SWIFT replica. German and French finance ministers have jointly announced in August 2018 plans to develop such a platform to specifically provide services to heavily sanctioned Iran and Russia.

Other easy to use, much older alternative remittance and underground banking systems include “hawala,” “hundi,” “fei ch ‘ien,” “chit system,” “poey kuan” and the black-market peso exchange. All feature efficiency, anonymity, lack of a paper trail and are immensely attractive for the transfer of both legitimate and illicit funds.

An option of bulldozing some of such services may still be viable by the demand of shutting down, say, Russian SPFS, under the threat of cutting the country’s banks from SWIFT, or, at least, could be utilized as a negotiating leverage. It may not exist in the future war of financial services where globalization rapidly strengthens recent outsiders and the US’s overregulation might set us up for fundamentally losing it, just like the many trade wars we have already lost.

We are quite far from such a prospect as of now, as all those services are a baby steps on a scale of current SWIFT supremacy, but let’s not forget the story of the young Russian Sergey Brin pitching to Yahoo! his search engine in 1998, the arrogant rejection and Google turning a money-printing machine and a verb by 2002.

Alternatively, could there be an option to work with those financial platforms, instead of ignoring them? At least for the sake of retaining the priceless intel? Such a possibility seems too remote for the one-dimensional regulatory thinking, but may appeal to strategic political minds.

Financial monitoring and control should become the cutting edge of US policies and a strategic matter of national security as a means of retaining ultimate world dominance. However, the inherited conservatism of the financial sector and of governmental regulation may result in an anachronism, lagging behind in terminal failure to adjust to dangers of fast-pacing development in the most demanding industry sector, compromising the entire leadership of Western democracies.

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