As part of a new round of sanctions against Moscow, the United States, Britain and Canada moved on Saturday to block Russia’s access at SWIFT.
To limit the Russian central bank’s ability to support the currency, the United States and its European partners announced that they would also impose restrictions.
Here’s a quick overview of SWIFT and its importance:
These are the comments of market analysts and banks.
MOHAMED EL-ERIAN, PART-TIME CHIEF ECONOMIC ADVISOR, ALLIANZ, CHAIR OF GRAMERCY FUND MANAGEMENT:
“Including Russia from SWIFT can have a devastating effect on the Russian economy if it is done in a comprehensive manner and not just one-by-one.” There would undoubtedly be spillovers and spillbacks. This includes a greater stagflationary impetus for the global economy as well as increased Russian arrears to western creditors and companies.
MICHAEL ROSEN CHIEF INVESTMENT OFFICER ANGELES INVESTMENT ADVISORS SANTA MONICA CA:
“Europeans saw Russia’s expulsion from SWIFT as a “nuclear alternative,” which is the worst, most extreme, and last resort action they could take. It will be as impactful as a spear against an army tank if it is so.
“If Europe refuses to pay Russia for its oil or gas, then either the supply will be cut off or Russia simply will have to settle the bill later. Russia has large currency reserves and can still make revenue via SWIFT bypassing China or other parties.
“Europe (allowed itself) to become dependent upon Russian energy. This is a poor and inexcusable move. Biden’s sanctions on Russia last week cut off the country from US corresponding banks, which is a huge deal. However, it made an exception for energy payments. We will need to block Russia from SWIFT, with no exceptions for energy payments. Additionally, we may consider secondary sanctions against third parties that bypass SWIFT in order to have the greatest impact on Russia.
TOM MARTIN SENIOR PORTFOLIO MANGER, GLOBALT INVEESTMENTS, ATLANTA
The markets will soon realize that SWIFT is going be difficult. You will see volatility because all participants will adjust their risk tolerances to the circumstances. People will likely turn to gold as a traditional hedge in such situations. U.S. Treasuries will likely be a safe haven, regardless of their duration. Other than that, there is nothing that won’t be volatile.”
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO
We should see the ruble plummet, most likely to the 86 mark at open. Investors will flee Russia as new sanctions are likely to severely impact the Russian economy and reduce the appeal of any item that can be traced back towards Moscow. The ruble will have trouble finding a bottom, with the central bank likely to be subject to severe restrictions on currency intervention. Nobody wants to be bitten by a knife that is falling.”
HARRY BROADMAN CHAIR OF EMERGING MARKETS MARKETS PRACTICE BERKELEY RESEARCH GROUPE, WASHINGTON D.C.
As we all know, sanctions have many flaws. You can increase the likelihood of them being effective the more extensive they are. It is difficult to see the motivations behind Putin’s decision-making in this instance. The probability of success increases the more sanctions we place and the larger the coalition of people who put them in place. There is no magic formula.
FORMER RUSSIAN DEPUTY CENTRAL BANK CHAIRMAN SERGEY ALEKSASHENKO WASHINGTON DC
It means that there will be a disaster on the Russian currency exchange market Monday. They will cease trading, and the exchange rate will then be set at an artificial level, just as in Soviet times.
It’s worse than the Russian financial crisis of 1991, because it’s unclear under what circumstances all this can be cancelled. This is the most powerful decision I could make and it’s my absolute right.
ROSS DELSTON (U.S. LAWYER & FORMER BANKING REGULATOR), ST LOUIS MO:
“It’s the closest thing that a declaration of war is from a financial standpoint. These are the sanctions one would expect to see if there were a real war between the US, Russia.
“It will lead to Russia being considered radioactive by US banks and EU banks. This would in turn be a significant barrier to trade with Russia.”
JORDAN KAHN PRESIDENT AND CHIEF INVESTRMENT OFFICER, ACM FINDS, LOS ANGELES
“If we are talking about effects on the market, I believe it will be viewed as negative. Global banks are all interconnected at one point so if this causes an attack on Russian banks or any other reason, that perception is negative. This is combined with the fact the U.S. tightens the screws on Russia through SWIFT.
“We saw cyber attacks late last week… I think there could be some concern amongst the investors about further retaliation from Russia: Are they going to intensify matters out there?”
“And so, I believe the concern is going be that this might escalate the back-and-forth retaliation. It may be a long-term positive, as it is an effort to pressure Putin to resolve the issue. It seems to be a net negative in the short-term.
There’s perception, sentiment and reality. Then there’s the truth and the basics. Although I do not believe that banks will be required to report earnings for the entire year, or any charges, in the long-term, I believe that banks in the United States could become concerned about whether this has any ripple effects on the global banking system.
CLAY LOWERY EXECUTIVE VICE-PRESIDENT, INSTITUTE FOR INTERNATIONALFINANCE:
These new sanctions which include the removal of several Russian banks from SWIFT as well as sanctioning Russia’s central banking are likely to cause severe damage to Russia’s economy and its banking system. This will likely to increase bank runs and dollarization, leading to a sharp selloff and draining reserves.
Trade is expected to have the largest impact on the global economy. Although details about how these new sanctions will affect energy are still being developed, we know that Russia’s central bank will impose sanctions making it harder for Russia to export commodities and energy. We may see commodities prices rise as a result.
DENNIS DICK HEAD OF MARKETS STRUCTURE & PROPRIETARY TRADER, BRIGHT TRADING LLC LAS VEGAS
“I believe the entire world is trying to find a way to clearly rectify, or at least stop, what’s going on over in Ukraine.
Wall Street will likely view any type of action they take that clearly avoids… us sending troops over, as a positive.”
“Is Wall Street in the end? It seems like it could be, at least to me.”
“I believe that whatever the U.S. does to limit Putin’s financial situation will be seen as a positive by Wall Street.”
SONIA KOWAL, PRESIDENT, ZEVIN ASSET MANAGEMENT, BOSTON
To have a functioning economy, you need a functioning bank system. This is a step towards destroying the Russian economy.
EDWARD MOYA SENIOR MARKET ANALYST OANDA NEW YORK
“This will be compared to Iran’s economic disaster and its crippling effects on their economy. This is more likely than not to cause a major shock to the global financial markets on Sunday night.”
I think traders started to believe that the US and Europe weren’t taking a tough stance. They were more focused on the economic situation and not posing a threat to the financial system. This will be a difficult action to take in and will cause a lot more investors to lose faith.
MICHAEL FARR is the CEO AND FOUNDER of FARR, MILLER, & WASHINGTON LLC.
“Markets look for surprises and it could mean a slowdown of international trade.
“This decision to remove Russia from SWIFT is a sign that they are putting their money where there mouths are. This will reduce Russia’s ability execute transactions all over the globe and cut their financial flows from most countries. It is a serious step that should be given their full attention.
The issue here will be the inflation that is caused and how it can slow down the European economy. If it continues, it could cause headwinds.
PAUL MARQARDT LAWYER WITH DAVIS POLK WASHINGTON DC
“Getting kicked off SWIFT does not make transactions impossible. It makes them more difficult. Getting kicked off SWIFT would significantly increase transaction costs.”
PHIL ORLANDO CHIEF EQUITY MARKET STRATEGIST FEDERATED HERMES NEW YORK
“We have been asking for the US to ban Russia’s SWIFT account and to sanction Russian oil and gas purchases. We can tighten them even more. He said that investors should expect Russia to resort to cybersecurity against others if they are forced into an economic crisis.
