Economist Max Fraad Wolff argues that an alternative banking system would emerge if the West decides to "weaponize" SWIFT
This article originally appeared at RT
While the West may try to slap Russia with more sanctions, the SWIFT banking payment system will try to stay out of political crossfire, economist Max Fraad Wolff told RT, adding that if it eventually gets weaponized, an alternative will emerge.
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.