Possible Effects Of A Russian-Chinese Joint SWIFT System On The Eurasian Economy And The World Trade System

Teoman Tulun ()

No tj4hs, OSF Preprints from Center for Open Science

Abstract: The Society for Worldwide Interbank Financial Telecommunications, called SWIFT, is considered a cornerstone of global transactions. At its founding, SWIFT membership amounted to 239 banks from fifteen Western countries. Past examples show that SWIFT can also be used as a weapon, even though it is nominally independent. Recent statements indicate that the US and the EU are seriously considering removing Russia from the SWIFT system in case of tension. In fact, back in 2014 after Russia annexed Ukraine's Crimea Peninsula, there were calls to cut Russia off from SWIFT. In response, Russia developed a its domestic financial-communications platform. It should be taken into account that in case certain Russian banks are disconnected from SWIFT, these Russian banks and multinationals looking for ways to move money may find a warm welcome in the growing Chinese Cross-border Interbank Payment System (CIPS). In recent years, there has been a significant increase in both the EU and the US use of economic sanctions to force other countries they consider as adversaries "in line" with Western interests. Being in the same alliance no longer suffices in guaranteeing exclusion from such economic sanctions. On the contrary, such sanctions have been turned into a teaching lesson even to allies, and it is undeniable that this behavior has reached a level that will shake even the strongest alliances. It should also be kept in mind that this contemptuous approach erodes the patience of the public opinions of the countries that are not included in the Western World or constantly excluded despite being in that group. It is unlikely that the results of employing sanctions, which has become a habit for the US and the EU, to the most significant countries of the world, such as Russia and China, in terms of their military power as well as their economies, will lead to beneficial results. The developments in the coming period may serve as a reminder that the Western world must act with common sense to avoid sowing divisions in the world trade system.

Date: 2021-12-21
New Economics Papers: this item is included in nep-cis and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:tj4hs

DOI: 10.31219/osf.io/tj4hs

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