SWIFT Ban Is a Major Blow on Russia and Puts China in a Dilemma: Experts

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As Russia’s invasion of Ukraine continues, in addition to the United States, Britain, Canada, and the European Union (EU), more countries have agreed to exclude Russia from the SWIFT banking system. Experts believe the ban is expected to bring a major blow to the Russian economy and put China, as a supporter of Russia, in a dilemma.

EU countries, including Germany, Hungary, and Italy, have agreed to exclude some Russian banks from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system,  as part of the sanctions against Russia for its aggression toward Ukraine, which will further isolate Russia from the international financial system.

Chiou Jiunn-rong, a Taiwanese economist and former professor at the Department of Economics at Central University, Taipei, told the Chinese edition of The Epoch Times on Feb. 28 that many Russian goods must be traded with other countries through exchange, including oil and natural gas, which are Russia’s main energy export. If the ruble is kicked out of the SWIFT system, Russia will not be able to settle and clear transactions with the currencies of other countries and it will have a great impact on the entire Russian economy.

“Among the entire sanctions, the most drastic and serious is to kick Russia out of SWIFT, which is equivalent to cutting off Russia’s financial ties with Western countries. Now it seems that the West has decided to do so.”

“The most important thing is that once Russia’s foreign exchange reserves are frozen, it has absolutely no way to obtain the funds and materials it needs from the Western world,” Chiou said.

Chiou estimates that after Russia is excluded from SWIFT, Russia will only be able to do exchanges with China in the future financial system.

China’s renminbi cross-border interbank payment system (CIPS), launched in 2015, may serve as an alternative. Both China and Russia have aimed to use CIPS as a financial system between the two countries without involving a third party.

However, according to mainland Chinese media reports, in 2021, the settlement method of Sino-Russian bilateral trade was mainly in U.S. dollars, accounting for more than 80 percent of transactions. Payments in RMB are 17 percent, and the proportion of payments in rubles is still low.

Hours after Russia launched its military invasion of Ukraine, China announced that it would lift the import restrictions on Russia’s wheat.

Chiou pointed out that the first government to provide assistance to Russia after the war broke out was the Chinese regime, which indicates that in the future, when Russia faces a shortage of supplies caused by Western sanctions, China will provide major assistance.

Su Tze-yun, director of the Institute of National Defense Strategy and Resources of the Taiwan Institute of National Defense Security, told The Epoch Times on Feb. 27 that although Russia has increased its natural gas and oil exports to China, China’s help to Russia is still limited. In addition, Ukraine is an important country as it is part of the Chinese regime’s Belt and Road Initiative. Russia’s invasion of Ukraine disrupted China’s geopolitical layout in the region.

As for the major importers of Russia’s energy, EU countries that rely on SWIFT to pay, are now supporting the SWIFT sanctions on Russia. Chiou said that with the tension and confrontation between China and the United States, China is quite dependent on European Union countries in terms of trade and investment. Offending the EU will further hurt China’s investment and trade in Europe.

According to data from the General Administration of Customs of China, the total value of imports and exports between China and the EU in 2021 reached $828.11 billion. China is currently the EU’s largest trading partner. Chiou said that, in contrast, the economic scale and importance of China and Russia are far less important than Sino-European trade. “This is indeed the main reason why China has not dared to explicitly express its position regarding Russia’s invasion of Ukraine so far.”

Lin Cenxin and Luo Ya contributed to the report.

Alex Wu


Alex Wu is a U.S.-based writer for The Epoch Times focusing on Chinese society, Chinese culture, human rights, and international relations.

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