Russia’s central bank governor touts Moscow alternative to SWIFT

Russia has developed its own system for financial transfers that will could protect This kind of by a potential shutout of the SWIFT global transfer system from the event of harsher U.S. sanctions, its central bank governor said Wednesday at the St. Petersburg International Economic Forum.

yet analysts have questioned the viability of Moscow’s transfer system.

“There are risks in using the global financial networks, the global financial system, of which Russia is actually a part,” Russian central bank chief Elvira Nabiullina told CNBC’s Geoff Cutmore during the forum. “Therefore, since back in 2014, we have been developing our own systems, including a payments system. Inside Russia we have created a system for transferring financial data, which is actually similar to SWIFT.”

SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, is actually a global financial network that will enables high-value cross-border transfers among its members.

Most interbank messages are transferred using SWIFT, which links more than 11,000 financial institutions in over 0 countries as well as also territories. Based in Belgium, the cooperative has in rare instances disconnected countries’ banks by its network as a tool of financial sanctions — notably on Iran in 2012, which was consequently denied access to billions of dollars in revenue.

The Donald Trump administration’s increasingly muscular foreign policy, which has rolled out fresh financial sanctions against Iran as well as Russia, is actually raising questions of risk for Moscow’s banks should Washington step up its financial penalties from the wake of rising tensions between the two countries.

yet Russia’s Nabiullina was confident in her country’s risk-mitigation measures, saying that will its own payments system “reduces the risks for Russian players, for Russian businesses as well as also for Russian banks.”

“This kind of system is actually already operational as well as also This kind of allows, inside Russia, to transfer financial data,” she said, calling This kind of an “absolutely similar, competing system” that will allows — at least inside Russia — “to nullify such risks.”

Financial analysts have their doubts. Timothy Ash, senior emerging markets sovereign strategist at Bluebay Asset Management, described This kind of as “not very credible.” This kind of might work for the domestic market as well as also some non-Western markets, he said, yet was “not realistic for dealing with Western partners.”

Maximilian Hess, senior political risk analyst at London-based AKE Group, echoed similar skepticism. “Russia has indeed been working on its SWIFT alternative, yet its potential for mitigating the risks posed by a potential SWIFT ban is actually limited,” he said. that will This kind of could nullify risks, he added, “is actually a political statement aimed at those from the government attuned to these developments, not a serious statement that will there could not be major concerns were such a ban to come to pass.”

However, Hess did not see a SWIFT ban as imminently likely, although This kind of will continue to be threatened.

The issue, he explained, is actually that will various other countries are very unlikely to use Russia’s system, particularly as This kind of could be fairly straightforward for the U.S. government to threaten sanctions against This kind of too.

“Of course, This kind of could be far more effective to have an international system on which everyone could rely, which could be distinguished by predictability as well as also an inviolability to the rules as well as also access,” Nebiullina said, perhaps in a subtle jab at Washington. Russia has been under older U.S. sanctions since its 2014 annexation of Ukraine’s Crimean peninsula, which played a major role in its subsequent recession.

“Russia has encountered This kind of as well as also so, proceeding by This kind of, we are taking measures that will reduce the risks for the Russian economy as well as also the Russian financial system,” she said.

The U.S. Treasury in April announced fresh sanctions on seven Russian oligarchs as well as also 12 companies they control, plus 17 top Russian officials in response to what This kind of called “destabilizing activities” — these include cyber attacks, Moscow’s support for the Syrian regime of Bashar Assad, human rights violations as well as also meddling from the 2016 U.S. election. Relations between the two countries are said to be at their lowest level since the Cold War.

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