A major Russian business group has responded favorably to German Foreign Minister Heiko Maas’s calls for the European Union to free itself from its financial dependence on the United States by adopting its own international payments system, serving as an alternative to SWIFT.
Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, a major lobbying group promoting the interests of Russian businesses, both state and private, has expressed support for Russia joining new financial telecommunications networks established by either the European Union or China.
“Some of Gazprom’s partners on the Nord Stream 2 project are saying that if secondary sanctions will not allow them to carry out settlements in US banks (and any dollar settlement is a corresponding account in US banks) they will be forced to withdraw from the project,” Shokhin explained, speaking on Russian business TV network RBK.
“Europe has not yet found a way, as seen with the example of Iran, to circumvent these secondary sanctions. If Europe does find a way, if they create a payment system like SWIFT, but based on the euro, we will need to join them. Perhaps the Chinese will help us create something [similar] based on the yuan,” he added.
Stressing that there was “no ready-made recipe” on how to deal with the secondary sanctions issue, the business official emphasized that while Russia should “hope for the best, it should proceed from the worst” on the matter.
In a related note, Shokhin pointed out that Russia cannot simply ‘turn to the East’ and refuse to cooperate with US financial institutions altogether in favor of its Chinese partners, given that Asian financial structures are also dependent on the US financial system.
“As far secondary sanctions are concerned, large Chinese banks and other banks from the ASEAN countries, will be cautious. As transnational structures, they will be sure to weigh both the situation in the US market, and contracts in dollars to see how they respond. Therefore, simply ‘turning to the East’ and saying ‘We don’t need the Americans now, we can replace them with the Chinese, the Koreans, the Japanese, the Filipinos, the Vietnamese’, this is not possible.”
Last week, in an address to German diplomatic workers, Foreign Minister Heiko Maas confirmed that the EU was working on an alternative to SWIFT as part of its efforts to save the Iran nuclear deal. After the US withdrawal from the landmark nuclear agreement in May, Washington threatened to hit European companies doing business with Tehran with secondary sanctions, i.e. measures against individuals or companies cooperating with Iranian enterprises. The US has made similar threats against energy concerns partnered with Russia on the Nord Stream 2 project, a 1,200 km pipeline set to run from Russia through the Baltic Sea to a hub in Germany.
In the wake of Western sanctions over the Ukrainian crisis and threats to cut Russia off from the SWIFT payments system in 2014, the Russian Central Bank has created its own network, known as the System for the Transfer of Financial Messages, to be activated in the event that Russia’s access to SWIFT is cut. The system, tested by Russian oil giant Rosneft in December, is already used by several enterprises, including state tech giant Rostec, for interbank cash transfer services. Earlier this year, a source told Russian media that the Russian SWIFT alternative would also be upgraded to use blockchain technology by the year 2019.