Alwaght- The British prime minister says expelling Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) should be considered if a shaky truce between the pro-Russian forces and Ukrainian forces falls apart in eastern Ukraine.
David Cameron said that Britain would insist on hard-hitting sanctions against Russia if the truce between the warring sides in Ukraine is not respected.
“I would hope that the European Union collectively would respond very robustly with new sanctions, including so-called 'tier three' sanctions, really hitting the economy of Russia,” Cameron said.
On 12 September 2014, the EU announced the so-called ‘tier three’ sanctions, targeting Russia’s state finance, energy and arms sectors. Accordingly, Russian state banks are banned from raising long-term loans in the EU, exports of dual-use equipment for military use in Russia are banned, more arms deals between the bloc and Russia are banned, and the EU will not export a wide range of oil industry technology to the country.
In a non-binding resolution in September 2014, the European Parliament had called on the EU member states to consider excluding Russia from the banking system.
Moscow in response said it would retaliate strongly if it were to be excluded from the SWIFT.
In December 2014, the Central Bank of Russia (CBR) launched a domestic SWIFT-style payment service to decrease dependence on Western financial services.
The new service allows Russian credit institutions to transmit messages in a SWIFT format through CBR to all parts of the country without any restrictions.
The remarks by the British prime minister came as pro-Russia forces have declared that they are withdrawing heavy weapons from the cities of Donetsk, Grolovka, Telmanovo and the flashpoint railway hub of Debaltseve.
A peace deal came into effect in Ukraine on February 15 after an agreement was made between the leaders of Russia, Ukraine, France and Germany in the Belarusian capital of Minsk.
Donetsk and Luhansk have been hit by deadly clashes since Kiev launched military operations in April last year to crush pro-Russia protests there.
In May 2014, the situation in the two flashpoint cities started to worsen as residents overwhelmingly voted for independence from Ukraine in referendums.
Excluding Russia from the global SWIFT banking transactions system is another form of sanctions and would mean “war,” said Andrey Kostin, head of VTB Russia’s second largest bank, adding that should it happen Russia has a “Plan B.”
If Russian banks no longer have access to SWIFT, the American ambassador would leave Moscow the same day, he said.
Kostin added that the banking system is highly dependent on the dollar and euro, and is the most vulnerable part of the Russian economy. However, he said Russia has an alternative if the SWIFT system becomes no longer available to Russia. Last month the Bank of Russia said it’s going to launch an alternative for financial transactions in May 2015.
“There is much talk about the possibility of disconnection from SWIFT,” said VTB’s first deputy president Yuri Soloviev to Kommersant. He explained that 90 percent of all banking transactions are domestic that can be processed through alternatives to SWIFT.
"Problems may occur with the remaining payments passing through foreign contractor banks, but we are actively working on possible solutions," he added, saying VTB hopes disconnection from SWIFT won’t happen.
Earlier Andrey Kostin said that VTB is in talks with Sberbank on creating a new alternative to SWIFT.
After the US and EU imposed sanctions on Russian banks there were fears that the next stage would be cutting Russia off from the SWIFT system.
A call to shut down the SWIFT system in Russia first came from British Prime Minister David Cameron. A resolution in the European Parliament also included such a proposal.
However, SWIFT representatives said that they will not switch Russia off the company’s services despite political pressure, adding it has "no authority" to make unilateral sanctions decisions. The company said it can happen only if the EU takes the decision.
SWIFT is a global banking transactions system connected to more than 10,000 financial institutions in 210 countries. The daily turnover of payments made via SWIFT is around $6 trillion. Russia is the world’s second largest SWIFT customer after the US.
Furthermore, the US Secretary of State John Kerry held talks with his Russian counterpart Sergey Lavrov about the crisis in Ukraine one week after he accused Russian officials of “lying” over Moscow’s involvement in the beleaguered country.
The two men briefly shook hands for the cameras, but the atmosphere was tense and they did not make any statements.
The US has recently imposed sanctions on Russia’s largest bank in Crimea and a dozen of Ukrainian and Russian individuals over the crisis in Ukraine.
Russia has been targeted by a series of sanctions imposed by the United States and European Union for allegations that Moscow is arming and supporting pro-Russian forces fighting in eastern Ukraine. The Kremlin, however, calls the accusation "groundless”.
Russia has also slammed the US for making unfounded claims on Moscow’s presence in east Ukraine, another sign of deepening war of words between the two countries over the armed conflict in Ukraine.
