Wednesday, April 24, 2024

Vogon Today

Selected News from the Galaxy

StartMag

Swift, how it works and why Europe is divided over Russia. Yellow on the Italian position

2 years ago babelfish

Swift, how it works and why Europe is divided over Russia. Yellow on the Italian position

The United States says that Russia's exclusion from the Swift network is "an option," but acknowledges that Europe is against it. Above all, Germany (and Italy) oppose the measure. The United Kingdom, on the other hand, is in favor. While Italy …

German Chancellor Olaf Scholz said yesterday that sanctions on Russia for the invasion of Ukraine should not include exclusion from the SWFT, the international network for financial transactions . It is a declaration that, to be understood, must be read taking into account the very significant commercial relations between Berlin and Moscow, but also the strong German dependence on Russian gas: the SWIFT standard is also used for fuel purchases.

WHAT IS SWIFT?

As Bloomberg explained, SWIFT (an acronym for Society for Worldwide Interbank Financial Telecommunication) is the equivalent of Gmail for the global banking system. It is a code that guarantees to securely send financial messages between over eleven thousand institutions and companies in more than two hundred countries.

With "messages" – which travel in the order of 42 million per day – we mean orders, payment confirmations, trade and currency exchanges. The SWIFT system is owned by a Belgian company of the same name, founded in 1973 to replace the Telex system, born in the 1930s and at the time still used for communication between companies, although it had become antiquated.

WHAT THE EXCLUSION INVOLVES

For a country, being cut off from SWIFT can mean very serious economic repercussions: in short, it would see the ability to carry out international transactions diminish; banks and import-export companies should find alternatives to be able to proceed with the transmission of payments. True alternatives, however, do not currently exist. Since 2014, the Russian Central Bank has implemented its own system for financial messages between domestic and foreign banks, but it is little used: users are just four hundred, or so.

WHAT THE UNITED STATES SAY ABOUT SWIFT

On Thursday Joe Biden spoke of united views between America and Europe on economic sanctions on Russia. In reality, SWIFT divides the two parts. Russia would not be the only one affected by the exclusion from the grid, but also all those countries (mainly European) that depend on it for supplies of energy, cereals and other raw materials.

Biden said Moscow's expulsion from SWIFT is “always an option. But at the moment this is not the position that the rest of Europe wants to take ”.

THE DIVISIONS IN EUROPE

The divisions on SWIFT, in reality, are not only between America and Europe but also within Europe itself. During the G7 summit yesterday, British Prime Minister Boris Johnson pushed "hard" – reports the Financial Times – to expel Russia from the network; is also the position of Canada, another member of the forum.

Scholz's Germany, as seen, would prefer it not to go that far; Italy also has reservations and so does Hungary (particularly pro-Russian). Instead, the Czech Republic (whose president, Milos Zeman, thinks it is important to isolate Putin) and Poland (one of the most hostile EU member states to Moscow) would like it.

THE POSITION OF ITALY ACCORDING TO DRAGHI AND DI MAIO: DIFFERENCES?

THE WORDS OF FRANCO

On the suspension of participation in Swift "there is the concern of many countries, including Italy about the possibility of continuing to pay for Russian natural gas: if a sanction were to interrupt the payments of gas flows, a country like Italy, which uses Russian gas for 43% of its gas needs, therefore 15-16% of the total energy requirement, it is clear that the sudden loss of these supplies could be a problem ”. Economy Minister Daniele Franco indicated this to reporters, explaining the position of Italy which has slowed (like Germany among other states) a quick decision on Swift to strike Russia. "This is the concern, we talked about this: in any case there is no difference of opinion on the fact that sanctions should operate, we just have to be careful not to create (negative) situations in many countries including Italy who use Russian gas every day ”which cannot be replaced quickly.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/swift-russia-italia/ on Fri, 25 Feb 2022 10:26:21 +0000.