Eric Dor: This is indeed one of the sanctions that the United States may impose. Swift is a system for sending fast secure messages that accompanies cross-border payments. If a French customer, for example, buys Russian gas, a payment that must be made in dollars from France to Russia, a French customer will ask his French bank to send a dollar to the seller’s account in a Russian bank. So there is a movement of funds that needs to be done between the two banks. This type of cross-border payment is accompanied by a message ordering to debit an account for transfer to another bank in the second country. Swift has been around since the 1970s. It has made secure and extremely fast cross-border payments. Before Swift, this could have taken several days and the device was much less secure. At the time, to communicate with each other, the banks used Telex or postal mail.
With the rubble of American sanctions, we immediately realize that if we disconnect Russian banks from the Swift system, we make cross – border payments to Russia very difficult. They are quite handicapped. It becomes complicated to sell and acquire products. It will not be impossible because we will still be able to resort to the old methods, but it will be very restrictive, and therefore very boring for the Russian economy.
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What will the economic sanctions imposed on Russia cost French companies
The Americans could take a much worse sanction against Russia. The way they did for a country with which they do not agree on the nuclear issue, it would prevent the clearance of dollar transactions with Russia. Americans start from the following principle. Any dollar transaction at some point requires clearance of American territory through the Central Bank. They can be proud of their rights outside the territory because of this. If, for example, we decree to ban transactions with such a country in dollars, we can think at the outset that this is a ban that only applies to American citizens and companies. The laws of a country usually have jurisdiction over the citizens and territory of that country. But they say for us that all foreigners, all citizens and foreign banks must also apply these sanctions. Why? Because if they do operate in dollars with the country that I approved, that will at some point imply compensation for American territory. And so they are going to be violating US law. Foreign banks can get the message that if they conduct operations with Russia, they will violate American law and be compensated in dollars on American territory and thus be punished for example by bans on subsidiaries in the United States. This would be a disaster for big investment banks such as BNP Parisbas or Deutsche Bank, so forcing them to avoid transactions with Russia would be a highly dissuasive move. So that would be the useful and even more powerful weapon than Swift cut.
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Does Europe largely underestimate the reality of the threat of Russian invasion of Ukraine?
Are other countries, in addition to the one already mentioned, already cut out of the Swift system?
To date, this country has been affected by this Swift-related sanction, as well as the dollar compensation. That is why the European Union, which has not agreed to these sanctions against this country, has tried to set up a barter system to continue to carry out transactions without this leading to and ending with dollar compensation.
Could Russia’s disconnection from the Swift system be a problem for European companies?
So said German Chancellor Olaf Scholz. Any sanction you impose on a third country may always fall on you because the third country will take retaliatory action. With Crimea in 2014, the Russians began to set up a financial messaging system in competition with Swift and successfully established with former USSR satellite countries, a SPFS system. They managed to connect with other countries and even China.
China is also trying to escape US financial domination. She supports a number of such projects. This could put pressure on Russia and China and all other countries in trouble with the West to proceed with their project to establish financial architectures that surround the Western system. This could ultimately hurt us and our financial organizations in the long run. If we prevent transactions with Russia, this would be a problem for all Western companies. Prohibiting Airbus from selling planes to Russia, prohibiting payment from Russia, or preventing people from obtaining Russian gas… could be severely restricted. We have few other options. The alternative is to liquefy and ship gas from Qatar for example or the United States It will take a long time before production capacity is increased to offset Russian gas. In addition, we do not have LNG carriers. It is not a short-term solution. It is for these reasons that Olaf Scholz is much more reserved about this decision.
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What can Russia do in the case of “unprecedented sanctions”?
Could this be counterproductive for Westerners?
He said we should be wary of this possibility. There is another way to act, which is to punish individuals directly by freezing the assets of the leaders abroad and all those close to them in a particular country. They can also be banned from traveling.
Only the old satellites that use the Russian alternative SPFS? European banks could not use it for financial transactions with Russia? Is it impossible?
Some initiatives aim to link it with the systems of other countries such as China. While in a Middle Eastern country, in Europe we had tried to escape the imposition of sanctions prescribed by the Americans, in this case we are all supposed to agree. The European Union, the United Kingdom, the United States must come together in the same direction. We are supposed to act as NATO allies.
The Russian government is sending troops near Ukraine to impress us because they want a treaty that guarantees that Ukraine will not join NATO and that even in some post-satellite countries will demand the USSR, such as the countries Baltic with NATO – destroyed troops. withdraw them. So it is a question of NATO vs Russia.
Which French banks are most at risk or most exposed to Russia?
Three banks are highly exposed to Russia in terms of direct exposure through subsidiaries. In France, there is Société Générale in particular. Russia ‘s recent share accounts for only about 6% of Société Générale’s net income.
Raiffeisen is the most exposed in Austria. More than 30% of the net income of this bank goes through this Russian subsidiary.
UniCredit is also in Italy.
If we cut Russian banks from Swift and dollar clearing, this will have a serious impact on their international activities and profitability. So you have less income coming from the Russian side for the banks concerned. Société Générale receives less income.
If these Western sanctions are leading to a serious recession in Russia, which is more or less the intended target, at this point we can imagine that Rosbank, like other banks, will have many more customers. Russians, default on their loans and they really will. difficulty. This will be an additional problem for Western parent companies.
All Western banks, if the international financial system is severely disrupted by the fact that Russia is cut out of the system, everyone will suffer little, but from the global implication. Stock markets can fall out of fear. This can have a very rapid impact on banks with a corporate and investment banking component such as Crédit Agricole, Société Générale, BNP, which can generate less revenue in these sectors of activity. And then everyone loses.
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