Against Russia, Westerners take out the financial weapon. And this time, they hit hard. The new salvo of sanctions decided during the weekend will prevent most Russian banks from using “Swift” messaging, the tool that allows transactions to be carried out. It will therefore become more difficult to trade with Russia. Only a few banks will be spared for the time being, in order to preserve the possibility for Europeans to buy gas and oil.
→ EXPLANATION. Against Russia, an economic weapon called Swift
But the measure that should do the most harm to the Russian economy is in fact another one, also in the sanctions package, but which has gone more unnoticed. Developed countries want “prevent Putin from using his war chest” on “freezing the assets of the Russian central bank”, explained the President of the European Commission, Ursula von der Leyen.
A mattress equivalent to 560 billion euros
We know that Russia has been preparing for a long time to face sanctions. For this, it has accumulated the equivalent of 560 billion euros in foreign exchange reserves, held by the central bank of Russia. About 120 billion is in the form of gold, directly in its coffers, and therefore out of reach. But the bulk is in the form of financial securities which are on deposit with multiple intermediaries.
→ ANALYSIS. Industry, finance… How Western sanctions want to isolate Russia
“These may be corporate bonds or French, German or American debt securities, explains Éric Dor, director of economic studies at Iéseg. These securities are registered in the register of central depositories, such as Euroclear for France. And it can therefore be frozen by decision of the State in which these titles are registered. »
A hunt for Russian assets around the world
Clearly, the Russian central bank should no longer be able to sell these securities to buy rubles and support its currency, or to bail out Russian banks that will need liquidity. This should therefore cause the ruble to plunge, prices to rise and weaken the entire Russian financial sector. These measures are intended to immediately make all Russian citizens feel the consequences of the current war, whereas, according to the official discourse, it is only a “targeted operation” which does not cause casualties.
“Swift’s shutdown remains a measure that can be circumvented. While this freezing of assets is massive, if we manage to find them, “ confirms Saxo Bank economist Christopher Dembik. The challenge, in fact, is now to track down all of these securities that are on deposit in central banks around the world, with depositories, or in the books of accounts of international organizations such as the IMF. Then the allies will have to enforce this freeze by all the States which will show themselves to be cooperative.
“The Kremlin has weaknesses”
We can think that China will not be. However, part of the Russian assets is in yuan and this part should therefore escape sanctions. But this freeze should still make it possible to seriously dent the reserves of the Russian central bank.
→ ANALYSIS. Sanctions against Russia: gas, an unwieldy energy weapon
“The Kremlin wants people to believe it’s a fortress, but that’s not true. He has weaknesses. notes Eric Dor. The financial sector, in fact, is particularly globalized, so that no country can claim to be totally independent. Monday, February 28 will be a first test to find out if the Russian financial sector is able to withstand the shock.