By Anthony Marcus, special correspondent for Eurasia Business News – February 27, 2022

View on the Radisson hotel in Moscow, 2018. In the background, the towers of the financial district Moskva City, with headquarters of large Russian corporations. From tomorrow, they will have difficulties to finance their work on the Western financial markets. Photo credits : Eurasia Business News.

Disconnecting from the SWIFT system, freezing the assets of the Central Bank and tightening the belts of Russian oligarchs in Europe is the European Union’s response to Russia’s military operation in Ukraine, has just announced the President of the European Commission Ursula von der Leyen in a briefing.

Western leaders, which also included the United Kingdom and Canada, decided on Saturday evening to expel Russia from SWIFT, the high-security network that connects thousands of financial institutions around the world.

According to Ursula von der Leyen, all of the following restrictions, agreed with the US, France, Canada, Italy, the UK and EU countries, “will prevent Putin from financing his war machine.

First, we are committed to ensuring that some Russian banks are disconnected from the SWIFT system,” said the President of the EU Commission.

This move should stop the work of Russian financial institutions around the western world and could effectively block the export and import of the Russian Federation with the West.

Secondly, we will paralyze the assets of the Central Bank of the Russian Federation . This will freeze its transactions and deprive the Central Bank of the opportunity to liquidate its assets,” said Ursula von der Leyen.

The German politician added that the European Commission would actively work to “prohibit Russian oligarchs from using their financial assets in European markets.”

Earlier on February 25, the European Union decide to approve unprecedented economic aid to Ukraine, with the adoption of a macro-financial aid package of 1.2 billion euros.

However, a total disconnection of Russia from the SWIFT system may strenghten the Russian approach of building a free dollar economy, in partnership 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.

Banning the main Russian banks from the SWIFT payment system is an attempt to cut Russia off from international trade, not so much with Asia and China with which alternative payment systems have been set up, but certainly with Europe, which trades a lot with Russia unlike the USA.

In 2014, the Bank of Russia launched the Financial Messaging System (SPFS) in test mode, which can transmit data in the SWIFT format, but does not depend on its channels. In December 2017, the SPFS was launched in test mode. It is now operational. By April 2021, more than 20 Belarusian banks, the Armenian Arshidbank and the Kyrgyz Bank of Asia were connected to it. Subsidiaries of large Russian banks in Germany and Switzerland also have access to it. Negotiations are underway on SPFS settlements with China. To date, 399 users are participating in the system, including banks from Belarus, Armenia, Kyrgyzstan, Kazakhstan, Tajikistan and Cuba. 

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. 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. 

Update to come.

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