Global financial rift: Russia-friendly countries abandoned SWIFT

Russia and Iran no longer need SWIFT to conduct transactions. Countries have connected their financial messaging systems so banks can now transact directly. Exporters, in turn, will be able to carry out transactions in national currencies: issue an invoice and receive money on it from Russian banks in Iran or Iranian banks in Russia. Meanwhile, China and India have become one of Russia’s leading trading partners in recent years, which, to a much greater extent than Tehran, are included in trade and financial relations with Western countries. Will they give up SWIFT? Financial analysts told MK about this.

Artem Golubev, Associate Professor of the Department of Economics, head of the master’s program “Financial Instruments in Economics” RANEPA St. Petersburg:

“SWIFT is an extremely convenient system for transmitting information and making payments. In fact, it has no analogues in the world, based on the advantages that exist when using this system. Banks in most countries of the world are connected to SWIFT. Regarding Russia and Iran, the banks of our countries were disconnected from SWIFT as part of the sanctions, and therefore were forced to look for alternative ways to make international payments.

It is difficult to find the benefits of being excluded from SWIFT if it concerns only a few countries that are disconnected from the system. For most countries (including China and India), developing an alternative system and moving away from SWIFT is completely impractical. SWIFT is a system that has been developed over decades, the members of which are more than 10 thousand financial organizations from all over the world. Any other alternative systems will most likely be a local option, including members from only a few countries and, at least at first, working with malfunctions and not without problems. Another thing is that in the current conditions, without an alternative to SWIFT, it will be extremely difficult for Russia to function as a significant player in the global market.”

Ivan Samoilenko, managing partner of the communication agency B&C Agency:

“The SWIFT interbank message system, in the context of anti-Russian sanctions, is a tool with which the West can limit international payments between Russia and other countries. Therefore, our state has long been moving away from using this system and using an alternative – the Financial Message Transmission System (SPFS), which was created in 2015. SPFS is already used in cross-border payments by banks in more than 15 countries, including China, India, Cuba, Arab states, and CIS countries. Also, Russian banks are connected to banking payment systems that exist in these countries.

Accordingly, the share of settlements using SWIFT in the Russian financial system is constantly declining, while the popularity of SPFS (including in other countries) is growing. These actions are dictated by the need to protect Russia’s international transactions from possible Western sanctions. In addition, the transition to alternative payment systems simplifies the use of national currencies, making the country’s economy and financial flows more stable.”

Boris Usherovich, independent financial analyst:

“The sanctioned states have connected national banking messaging systems – that is, banks in Russia and Iran will now be able to exchange data without the mediation of Switzerland. It is important to understand here that SWIFT is also an information exchange system, in fact, a kind of specialized banking messenger. There are many such systems, but SWIFT is the most convenient, and most banks in most countries use it. Unification in banking is especially important.

As for India and China, the Celestial Empire has its own analogue of the interbank transaction system. However, it works in parallel with SWIFT – it is not profitable for China to “exclude” itself from the global banking system, just as it is not beneficial for the global banking system. So, of course, China can completely switch to its own system – but this will only happen if for some reason it is disconnected from SWIFT.”

Mark Goikhman, analyst at Capital Skills Financial Academy:

“International interbank settlements via SWIFT are carried out in hard currencies through correspondent accounts mainly in Western banks. Under the conditions of sanctions against Iran and Russia, key banks in these countries are disconnected from SWIFT. This complicates external payments, settlements for exports and imports with other countries. Therefore, the transition to mutual settlements using alternative payment systems independent of SWIFT facilitates transactions between Moscow and Tehran. Now transactions will be carried out through established bilateral payment relations and will take place in national currencies – rubles and rials.

Such a transition required a rather complex reconfiguration of banking and foreign economic systems in general, coordination of conditions, programs, etc. Therefore, the transition from SWIFT took quite a long time. Now trade turnover is easier. Russia supplies Iran, in particular, with metals, fertilizers, chemical products, wheat, and corn. And it imports, for example, cars and spare parts, fabrics and other light industrial products, vegetables and fruits. The desire to reduce dependence on the dollar and other hard currencies promotes the use of national currencies and alternatives to SWIFT in relations with other countries. In particular, China and India have become one of Russia’s leading trading partners in recent years. Settlements in yuan and rupees are becoming increasingly important, as opposed to dollars and euros. But, on the other hand, Beijing and New Delhi, to a much greater extent than Tehran, are included in trade and financial relations with Western countries; they are not under sanctions. Therefore, there is no such pressing need for them to look for alternatives to SWIFT.”

Albert Koroev, head of the department of stock market experts at BCS World of Investments:

“Russia and Iran abandoned SWIFT because Iran is already disconnected from the system, and in Russia many banks are under blocking sanctions. The combination of systems – Russian and Iranian – apparently represents a technically implemented, secure infrastructure for transmitting information about transactions between financial institutions of the two countries. China and India have their own systems for transmitting financial messages, and the possibilities of cross-country connections are being explored so as not to depend on SWIFT.”