MCViewPoint

Opinion from a Libertarian ViewPoint

By Enforcing Sanctions on Russia, SWIFT May Commit Suicide

Posted by M. C. on March 9, 2022

After Donald Trump pulled the U.S. out of the Iran nuclear deal,  the EU announced the creation of a special payment channel to circumvent U.S. economic sanctions and facilitate trade with Iran. EU foreign policy chief Federica Mogherini made the announcement after a meeting with foreign ministers from Britain, France, Germany, Russia, China and Iran. She said the new payment channel would allow companies to preserve oil and other business deals with Iran.

This underscores a risk to the U.S. sanction policies could also have long-run consequences, eventually undermining the dollar as the world reserve currency.

https://libertarianinstitute.org/articles/by-enforcing-sanctions-on-russia-swift-may-commit-suicide/

by Michael Maharrey

The government of the United States has intervened militarily in other countries for decades, against the council of founders like George Washington who advised America should “observe good faith and justice towards all nations; cultivate peace and harmony with all.”

But the U.S. doesn’t only project power across the globe through its massive military. It also weaponizes the U.S. dollar, using its economic dominance and its privilege as the issuer of the reserve currency as a carrot-stick tool of foreign policy.

The U.S. government showers billions of dollars in foreign aid to “friends.” On the other hand, “enemies” can find themselves locked out of SWIFT, the global financial system that the U.S. effectively controls using the dollar.

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. The system enables financial institutions to send and receive information about financial transactions in a secure, standardized environment. Since the dollar serves as the world reserve currency, SWIFT facilitates the international dollar system.

SWIFT and dollar dominance give the U.S. a great deal of leverage over other countries.

The U.S. has used the system as a stick before. In 2014 and 2015, the Obama administration blocked several Russian banks from SWIFT as relations between the two countries deteriorated. Under Trump, the U.S. threatened to lock China out of the dollar system if it failed to follow U.N. sanctions on North Korea. Treasury Secretary Steven Mnuchin threatened this economic nuclear option during a conference broadcast on CNBC.

“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system, and that’s quite meaningful.”

Locking a country completely out of SWIFT would effectively cut it off economically from the world. But there would also be consequences that ripple through other economies. For instance, a member of the Russian parliament warned locking his country completely out of SWIFT would halt the flow of goods into Europe.

If Russia is disconnected from SWIFT, then we will not receive [foreign] currency, but buyers, European countries in the first place, will not receive our goods — oil, gas, metals and other important components.”

Given America’s history of using sanctions as a foreign policy tool, Russia wasn’t unprepared for the move. In fact, A number of countries that know they could easily find themselves in the crosshairs have taken steps to limit their dependence on the dollar and have even been working to establish alternative payment systems. This includes Russia, China and Iran.

See the rest here

Be seeing you

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: