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After the war between Russia and Ukraine, western countries lead by US declared that they will impose serious sanctions to hurt the Russia economy basis deeply. In which include cutting off the SWIFT system. But many European countries oppose this sanction. Why? Before analyzing the reason, let’s know what is SWIFT and what’s the importance of it.
SWIFT is a financial and global cooperation organization and the headquarter is in Belgium. 239 banks got together and set up a solution for cross-border payment in 1973. So far, SWIFT connects more than 11000 financial institutions from over 200 countries. SWIFT never hold or transfer capital but it’s an important part of cross-border capital flow and communication infrastructure.
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Western countries has cut off many countries’ SWIFT system as economic sanction like Iran. Some of the European countries oppose such sanction is because of the following reasons.
First is the actual effect of cutting off SWIFT system. Since 2014, Russia has prepare for the following sanctions. Facing the sanction, Russia activates the coping mechanism. Banks cooperate with partners with other means. They transfer the trading to SPFS which is an alternative solution of SWIFT. So cut off SWIFT system will not cause huge hurt of Russian economy.
Second, cut off SWIFT system is a double-edged sword. As a huge economy, Russia is the 5th biggest trade partner of Europe. Russia is one of the most important exporter of engine, car, electronic products, grains, semiconductor, energy and many others. It’s reported that in Europe, more than 35% of the natural gas and 15% of the oil come from Russia. Cut off the SWIFT system means cut off the energy trade with Russia. That’s will seriously hurt the European economy.
Last and the most important, as a weapon to hurt Russian economy, cut off SWIFT system not meet American’s benefit. America has irreplaceable influence to the world finance because of the status and great function in global settlement system of USD. Make the SWIFT politicization will make China cross-border payment CIPS develop. In the meantime, China Yuan will get higher international status. These are the result America doesn’t want to see.
For the above reasons, we analyze that western countries will not cut off the SWIFT system of Russia. As for the foreign trade industry, especially in China, we don’t have to worry for long time. The influence will be short. In another hand, Russian buyers can pry China Yuan through CIPS. But it’s true that the the order period will be longer, the returned money period will be longer as well.
We EverFlex suggest that foreign trade companies remain wait and see. Besides, we can communicate with Russian clients to pay by China Yuan. Generally speaking, we foreign trade companies don’t have to worry to much. EverFlex will constantly focus on the situation in Ukraine and give you helpful suggestions.
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