Views /Opinion

On the margins of Russian-Ukrainian war

Many people began to ask about the term “Swift code” which is being widely used these days in newspapers, TV channels, news websites and social media.

This is following the flow of information about the ongoing war between Russia and Ukraine on the one, and the measures taken by the US and the European Union countries to block the Swift system from Russia as part of a package of sanctions against Russia, on the other hand. Thus, an economic war has erupted between Russia on the one hand and the pro-Ukrainian West on the other hand. The Russian president expressed this by saying that these sanctions amount to a declaration of war against his country.

This war’s weapons are not planes, missiles or tanks, but the Swift system. This makes it necessary to explain the issue in a simplified manner because it is the system that plays a vital role in the global economy, a backbone of life today.

The term SWIFT is written in English like this (SWIFT) and these are the initial letters of the Society for Worldwide Interbank Financial Telecommunications, translated by the Society for Worldwide Interbank Financial Telecommunication. As an alternative to traditional bank correspondence and the old telex system, it is based on speed, high efficiency, confidentiality and security, as banks use this banking system to send unified messages that include transfers of money between them, in addition to selling or buying assets, for example, exporting countries receive their financial dues for the price of their products.

From importing countries through this system, as well as financial transfers between individuals through this system as well, as the beneficiaries are allowed to disburse their remittances or financial entitlements at the same time they are sent even if the sender is in the west of the globe and the future is in the east, and therefore Western countries when they withheld this system About Russia With the start of its attack on Ukraine in the framework of the sanctions package, it became impossible for financial institutions to send money Neither in nor out of Russia, which made major Russian banks and companies in a state of turmoil, and which stopped the payment of Russia’s dues for its exports abroad, which were not due until the date of the blocking, and the execution of remittances between Russian citizens abroad and their relatives at home was also frozen. The opposite.

Of course, Russia cannot stand cross-armed watching the measures taken by the West. It must have taken into account this possibility before attacking Ukraine. It must have provided an alternative, albeit inefficient compared to the Swift system. The alternative is to join the Chinese CIPS system, which is similar to the Swift system. However, it is limited to dealing in the Chinese currency “the Yuan” only. It must be noted here that China is Russia’s largest trading partner in both exports and imports; 17.5% of the trade volume is in the Chinese yuan. But since the yuan is still far from being a major global currency compared to the dollar, it is not the most suitable alternative to the global SWIFT system. So, Russia gave a boost to its cross-border payment system (SPFS), which it had previously introduced in 2014 and has been mainly used by its domestic institutions since then.

It should be noted that blocking any country from the SWIFT system does not mean complete paralysis in the movement of financial and commercial remittances related to it. The US had previously removed Iran from the Swift system in 2012 as part of a package of sanctions against it. When talks about the Iranian nuclear program began in 2016, Iran demanded the reinstatement of the Swift system and it happened.

More than 200 countries around the world participate in the Swift system, 11,000 institutions operate in its framework and nearly 4 billion payment transactions pass through it, with daily amounts estimated at trillions of dollars. The most important parties in this system are the US Federal Bank, the European Central, the Bank of England, the Japanese bank, the Swiss bank and the Canadian bank. Statistics for the year 2021 indicate that 91% of the trillions that pass through the system are issued by these private members, while less than 9% of payments are made in 14 other currencies. Both the dollar and the euro accounted for 80.7% of SWIFT’s international transnational transactions in 2017.

A questioner may be asked: What about the situation of the Arab countries in this SWIFT system? The answer came from the head of the Middle East and North Africa (SWIFT) Seydou Bistani, who said:  The growth of the SWIFT system for remittances in the Middle East and Africa is doubled by tens, specially in Qatar and the UAE. Growth accelerated in Africa thanks to the expansion of Qatar National Bank, the largest bank in the Gulf region, Egypt and other African markets.

Thus it becomes clear to us that economic war is no less painful than military war.

Dr. Buthaina Al Ansari is a Qatari academic and author. She held many senior  positions in government and private sectors and higher education institutions including Qatar University.