Is the US contributing to weakening the SWIFT and the dollar?

Written by – Elijah J. Magnier:

The US unilateral hegemony is undoubtedly challenged, where Russia is standing against the US-led NATO expansion, preventing new potential members (Ukraine, Georgia, Finland and Sweden) from joining the western military body. That situation triggered western reactions by the US and its European allies, which imposed harsh sanctions on Russia (since 2014), including “weaponising” SWIFT, the worldwide banking system communication transfer, by denying its use to Russian banks. The Swift system has the function of informing users when payments have been sent and arrived and help make secure international trade exchange possible for the world banking system and its agents. It is, however, not supposed to be “weaponised”, used in disputes between nations. It is supposed to remain available since populations across borders use it.

Nonetheless, US sanctions (which include the operation of SWIFT) against Cuba, Venezuela, Iran and Russia are giving a serious signal to the rest of the world that it needs to find alternative transfer communication methods. These will effectively contribute to weakening the US’s dominance. China and Russia are leading the way for the dollar to become weaker and for SWIFT eventually to become dispensable.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) allows – 24 hours, seven days a week – money transfer across borders and is the key to the global American and western economic power tools. Created in 1973 and based in Belgium, SWIFT links 11,000 banks and institutions in more than 200 countries. It sends more than 40 million messages a day (about 10 billion messages a year) as trillions of dollars change hands between individuals, companies and governments. The US and EU banks created Swift to keep control of money flow, prevent institutions from developing their own systems, and stop these from developing a monopoly position. 

Neither the US nor the EU controls SWIFT directly, even if they exert significant influence on its governing body, theoretically, subject to Belgian law. It is jointly owned by more than 2,000 banks and financial institutions and overseen by the National Bank of Belgium, in partnership with major central banks worldwide, the US Federal Reserve and the Bank of England. It has given control to the US administration in the first place, through the SWIFT system, to de-list any person or government from this banking system and, in so doing, to cripple nations’ economies. In the case of sanctions, it impedes the excluded banks from executing their customers’ transactions with foreign countries, individuals or companies, meeting obligations, receiving payments for exports, or providing short-term credit for imports. 

In 2015, China- following the US-EU sanctions on Iran, North Korea, Sudan and Russia (to name but a few) in 2014 and the threat to deny access to SWIFT by Russian financial institutions-feeling, the US menace coming its way, created a parallel international messaging system called CIPS. The objective of CIPS is to facilitate the use of the renminbi as an international trading currency and provide a cautious level of protection from (US) sanctions, thus decreasing the global dominance of the dollar and seeking an overall de-dollarisation. China is promoting the CIPS system across Asia, Africa and Europe. Indeed, over 1,280 financial institutions in 103 countries and regions have connected to the CIPS system. The Chinese currency, the Yuan, makes its way among the top currencies and occupies fourth place worldwide after the British pound, the Euro and the dollar. It is the logical Russian and Iranian partner at the moment, two specific countries that were, and will remain, on the US hit-list.

When the US shredded the Iran nuclear deal in 2018, even the EU started to develop its own financial messaging system, i.e. the Instrument in Support of Trade Exchanges (INSTEX), for European companies to avoid becoming trapped in the US’s illegally imposed sanctions. Although INSTEX can’t protect the EU institutions from US sanctions if they deal with Iran and Russia, it is a system that will stand ready for a better era if and when the EU manages to free itself from the current US neo-colonisation.

Countries that rejected US dominance, like North Korea and Iran, have long been cut off from SWIFT, as has Venezuela since 2019. But nations with rich natural resources tend to adapt and find ways around sanctions – as Iran did for over forty years – but not without incurring additional financial costs and delays in transactions. But the consequences are evidently worth the move when the US uses SWIFT (and other harsh instruments of sanction) in an attempt to break the will of a population and its respective government.

Following the Ukraine war and the US-Russia bras-de-fer, on February 26th, the US, the European Union, the United Kingdom and Canada announced a commitment to ensure that several Russian banks be removed from SWIFT. On March 2, the EU detailed seven Russian banks which were excluded from the SWIFT messaging system in coordination with its western partners, including the US and the UK. The seven Russian banks removed from SWIFT were Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank, Vnesheconombank (VEB), and VTB Bank. 

Proofread by: Maurice Brasher