Home World wide Russia to lose 80pc of its foreign assists
World wide - February 26, 2022

Russia to lose 80pc of its foreign assists

Enayet Karim: The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a secure network for transmitting messages of Brussels-based interbank financial transactions. Russia could ban Swift transactions if attacks on Ukraine are not stopped. Sanctions from the United States and its allies indicate that 80 percent of assets in the banking sector will be confiscated.
The United States, Europe and Japan have warned Russia to seize about 80 percent of its assets and impose sanctions. This is an option to keep the country out of the main network for international commercial financing.
The move would put Russia at a disadvantage in dealing with a number of high-tech and dual-product exports. Russia could suffer major setbacks to American technology products, such as Washington’s 2020 move against China’s Huawei technology.
U.S. President Joe Biden says U.S. sanctions will limit Russia’s ability to trade dollars, euros, pounds and yen to be part of the global economy in financial management. But Moscow has ample foreign exchange reserves. The question now is what action the United States and its allies can take in the event of sanctions. So, will Russia be excluded from the Swift messaging network?
Local time on Friday (February 25), French Finance Minister Bruno Le Mayer called the move a “financial nuclear weapon.” Yasuo Sugeno, head of the Daewoo Institute of Research at the London Research Center, said there was still room for tougher sanctions.
Russia’s financial institutions have already been hit by US economic sanctions. Among them is Russia’s largest bank, Esbar, which has 100 million or 100 million customers. Also, VTB Bank, which handles all transactions in the military sector.
Japan’s sanctions include Russia’s state development bank VEBRF, a state-backed bank, Promsve, which finances Russia’s defense sector, and Bank Russia, which has transactions with Japan. The United Kingdom has also banned all banking systems in the country.
According to the US Treasury Department, Russian banks transact about 48 billion dollars in foreign exchange every day, of which 60 percent is denominated in dollars. This time the bank and VTB will face strict restrictions on transactions in dollars. Russia will no longer be able to transact in dollars with European and Japanese institutions through American banks.
A top Japanese bank official said Russia needed to find other ways to finance trade. Switches can encourage businesses to do business with smaller regional banks that are not covered by the sanctions.
The sanctions are aimed at restricting access to other currencies for individuals and businesses. Putting pressure on the ruble and this will hamper the Russian economy. A weaker currency makes imports more expensive, accelerating inflation, which has already reached 6 percent in Russia. The ruble hit an all-time low against the dollar on Thursday (February 24).
According to the US Department of Commerce, Washington’s trade embargo is aimed at the defense, aerospace and marine sectors. Where approval is required for the export of products such as semiconductor or chip industry, telecommunications and avionics (aircraft flight control systems and associated cockpit components, navigation, radar and communications systems, falling under avionics).
Most of the U.S. trade control managements are outsourced. Generally applied to transactions between other countries if the products contain 25 percent American content by price.
But President Biden said sanctions imposed by the United States and its allies would have a long-term effect on Russia.
Japan imposed a similar ban on exports of high-tech products to Russia on Friday (February 25th), local time. However, much remains unclear about the scope of those sanctions. However, it is learned that the relevant rules will be amended and published next March.
The United States, Europe and Japan still have a long way to go. Japan’s sanctions do not target banks or VTBs this time around. Smaller banks are also exempt from US sanctions Though there are fears that Swift could be included in the transaction ban, negotiations are still open, say those concerned.
German Finance Minister Christian Lindner told reporters local time on Friday (February 25th) that tougher measures were possible, but that their effects needed to be taken into account.
But Russia has a way to reduce the impact of sanctions, the country’s central bank says.
Russia’s international reserves, most of which come from gold, now stand at ? 830.6 billion. That’s 60 percent more than in 2014, when the country was banned from occupying Crimea, which is almost two years’ worth of imports.
Russia is trading less in dollars. According to the US Congressional Research Service, BRICS is an acronym for the five major emerging economies comprising Brazil, Russia, India, China and South Africa. BRICS members use dollars for their significant influence in regional affairs. Russia’s dependence on it has decreased from about 95 percent in 2013 to 10 percent or more in 2020.
Experts say the effectiveness of Washington’s trade embargo on Russia will largely depend on whether China plays a role. The provision to extend the ban on products made in American technology seems to have been included with Beijing in mind, as Japan and Europe have been exempted from it.
There have been mixed reactions to whether Chinese companies will ignore the ban and choose a strategy for banned export products to keep money flowing to Russia.

Check Also

Nothing to be worried over lowering growth projection by IMF:FM

Staff Correspondent: Finance Minister Abul Hassan Mahmood Ali has said there is nothing to…