‘If SWIFT gets weaponized, an alternative system is absolutely realistic’
RT:Do you think Russia will be blocked from SWIFT, or is this just an idle threat?
Max Fraad Wolff: So far it seems like it is mostly talk. But this has been threatened. We have seen it come up a few times. The rumor mill suggests it came up around comments by VTB Bank and the folks associated with that large Russian bank in and around Davos. Obviously the Russian sanctions were a major conversational piece in Davos most recently. And we have seen the escalation of sanctions.
However, that move – cutting of Russian banks from the SWIFT system, maintained out of Brussels – would make life significantly more difficult for Russian businesses around the world and would likely occasion a very stern response from Russian banks and possibly the Russian government.
RT:We have also heard talk about Russia and China last year discussing plans to launch their own international payment system, possibly as a rival to SWIFT. How realistic is that?
MFW: We have seen more and more agitation from folks who have either passive or long-term structural issues with various Western sanctions and/or Western arrangements, [and they are] discussing alternatives...whether that is discussing alternatives to Fitch, Moody's, or S&P out of the rating agencies, out of the Middle East, and in some cases out of East Asia, North Asia, out of Eastern Europe, out of most recently Russia and Chinese discussion – or hearing about an alternative to SWIFT.
Could you build an alternative interbank payment processing system? Absolutely. If SWIFT gets weaponized against anyone, particularity a large economy – Russia, China, something like that – we would be more likely see people accelerate.
The problem being that you don't want a lot of systems here. Interbank systems are vast when everyone has access to them because it is a universal mode of directional communication and you do more or less want everyone else to be on it.
RT:Prime Minister Dmitry Medvedev warned of a tough response if Russia is cut off. What kind of retaliation do you think he is referring to?
MFW: Well certainly Medvedev is speaking very aggressively there. But let’s be fair and honest here – if you are cut off from SWIFT, your ability to have any kind of normal business flow with the global commerce community is hampered. And so my guess will be that you’re going to see a huge response.
Part of what I think we’re seeing here is Russian authorities pushing back while folks sort of test a possible – what has been referred to, by the way, as the ‘nuclear option' – here. My guess is that cooler heads will prevail, that we won't see Russia cut off from the SWIFT system because it is in very few parties’ long-term interests.
And we should keep in mind two things: escalating sanctions, while it may make folks feel like they are retaliating for things they are upset about, do not actually have a great history of actually doing what folks want them to do. And they do have a history of hurting both the sanctioned and the sanctioner from an economic perspective.
RT: Back in October, SWIFT said it “will not make unilateral decisions to disconnect institutions from its network as a result of political pressure.” Is the neutrality of the system being undermined by political pressure from Washington and Brussels?
WFW: Sure. We’re seeing all kinds of political parties that want to stay out of these disputes and just be commercial and just make their various commercial way in the world by having as many users as possible. Seeing them sort of being shoved and bullied or pushed into these escalating fights, when you're seeing this as a sort of slow simmer that keeps getting the burner, the flame underneath the pot here keeps getting turned up by various retaliations and incidents and responses to incidents. So we’re seeing more and more, let’s call it, more or less neutral commercial apparatuses and parties pushed into the crossfire here. And that probably benefits just about no one in the long-term.