By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business News – February 26, 2022

Italian Prime Minister Mario Draghi and Ukrainian President Volodymyr Zelensky held a telephone conversation on February 26. As the press service of the head of the Italian government reported on Saturday, Mario Draghi expressed his full support for Ukraine and assured of the Italian approval of all EU sanctions against Moscow, including the disconnection of the Russian Federation from SWIFT payment system.

The EU is currently examining this measure in response to the Russian military operation in Ukraine. Many voices have been raised to exclude Russia from this essential tool in global finance, in order to put pressure on Russia by hitting it in the money portfolio. It is ” an option ” according to US President Joe Biden, but which the American president has so far refused to take, stressing that certain European countries are opposed to it for the moment, like Germany.

Earlier, the Italian Foreign Minister Luigi Di Maio announced support for this measure. The media reported that Rome was trying to avoid such a sanction, which is being discussed by the EU and insisted on by a number of countries. At the end of an informal meeting of the heads of EU economic departments in Paris on Friday, Italian Minister of Economy and Finance Daniele Franco indicated that Russia’s disconnection from the interbank system for transmitting information and making payments SWIFT could lead to problems when paying for gas supplies to European countries.

The German Finance Minister Christian Lindner warned that excluding Russia from SWIFT would lead to “a high risk” that “Germany will no longer be supplied with gas or raw materials“. Half of the gas imported by Germany comes from Russia.

In addition, any total disconnection of Russia from the SWIFT system could only strenghten the Russian approach of building a free dollar economy, in partnershio with China. Both China and Russia have been steadily purchasing gold bars since 2014 and have been voicing for an alternative global monetary system, built on regional currencies and not anymore on the US dollar.

Since 2014 Russia has more than doubled the amount of gold in reserves. Also, the Bank of Russia was the largest consumer of gold in the country. Also, the Russian central bank was the largest consumer of the yellow metal in the country. It purchased about 45% of the gold production from Russian mining sites in 2019. Russia was the second largest producer in the world in 2020 and accounted for 9.88 per cent of total global production, with 331.1t of mined gold.

Russia’s international monetary reserves rose by $3.6 billion from February 21 to 24, reaching a new all-time high of $643.2 billion. The Russian central banlk said the 0.6% increase was “mainly as a result of a positive revaluation.”

In May 2021, the Russian Foreign Ministry urged to promote alternatives to the payment system SWIFT. The Russian authorities launched a national payment system, and at the same time a SWIFT analogue was launched by the Russian Central Bank for national operations – Financial Message Transmission System (SPFS). Over the years, about 400 players have joined it, including more than 20 foreign banks, reported the business daily Kommersant last year.

There is a demand for new systems of international settlements, and some countries, such as China, are actively trying to play in this field. 

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© Copyright 2022 – Swann Collins, investor, writer and consultant in international affairs.