Denied Access to SWIFT, Russia Seeks To Offer Its Alternative System to India and China.
The great fear of America and the European Union could be confirmed.
Deprived of access to the SWIFT banking network, Russia is beginning to put forward its alternatives for continuing financial exchanges with partners who did not condemn its invasion of Ukraine. And India could lead the way. According to the Bloomberg agency, the Indian government would indeed be studying the possibility of going through the financial messaging system SPFS, developed by the Russian Central Bank since 2014.
The Asian giant is indeed seeking to continue to supply itself with oil and weapons from Russia, despite the international sanctions. As India has already repeated, the government does not especially support the Russian invasion of Ukraine, but it is the economic interest of India that prevails.
The BRICS do not want to align themselves with the decisions of the Western world without taking their interests into account. This is how a new monetary order is emerging for Larry Fink, the CEO of BlackRock.
No decision has been taken, the agency assures us, but the subject could well have been discussed at the end of last week, during the trip to India by Sergei Lavrov, the Russian Minister of Foreign Affairs. Representatives of the Russian Central Bank were also due to visit India at the end of March 2022, according to Bloomberg.
The great fear of the Westerners could be confirmed
This was one of the fears of the West as they just disconnected seven of the main Russian banks from SWIFT: that Moscow would manage to use parallel systems to break its financial isolation. And for good reason, since the invasion of Crimea in 2014, Russia has built its alternatives to international payment systems. Including MIR, a domestic bank card scheme aimed at guarding against dependence on Visa and MasterCard, as well as SPFS, for international transactions.
While MIR has become established in the country, SPFS is still far from being able to compete with SWIFT. According to experts, it is used by only 400 companies, mainly Russians, against more than 11,000 for SWIFT, spread over more than 200 countries. In addition, it does not work 24 hours a day, 7 days a week. As for the size of the messages that the system can transmit, it remains limited.
A rebate on Russian oil to convince India to connect to the Russian banking messaging system
To encourage its adoption and facilitate interoperability with India, Russia is ready to put in the means. According to Bloomberg, Moscow has offered to sell India its oil with a discount on each barrel. It must be said that for India, the decision to get closer to the Russian tools is not without risk.
If a country supports Russia, it risks being hit by secondary sanctions from the United States. India is one of the few countries that did not condemn the Russian invasion. As explained earlier, India is primarily looking out for its interests here, which means that the fact that there is a war in Ukraine is not their main concern.
But for Russia, the real issue is more to the East: convincing China to connect its systems to the SPFS would give the latter a whole new weight, making it more attractive to other countries. As a reminder, China's system is called CIPS. By the end of June 2020, about 980 financial institutions in 96 countries and regions had already used the system. In 2020, CIPS still relies heavily on SWIFT for cross-border financial messaging, but it has the potential to operate independently. And that is China's goal in the medium term.
An interconnection between CIPS and SPFS would foreshadow the creation of an alternative system that would witness the birth of a new world order in which East and West would once again be at odds.
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