The Central Bank of South Africa warned of the risks of imposing sanctions against the country due to ties with Russia
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Today, May 29, Reserve Bank of South Africa (SARB) released a report on the stability of the country’s financial system and the risks to this stability. Among such risks, the authors of the report named the possibility of imposing sanctions against South Africa. The possibility of sanctions was raised after a few weeks ago, the US ambassador accused South Africa of supplying arms and ammunition to Russia, despite the country’s statements of neutrality in the conflict in Ukraine.
According to SARB analysts, the introduction of secondary or indirect sanctions against South Africa could lead to an outflow of capital and a sharp reduction in its inflow. If the country is disconnected from SWIFT, South Africa will not be able to fulfill most of the international payments, since 90% of them are made using SWIFT. According to the authors of the report, the sanctions will lead to “the inability to finance any trade or investment flows, as well as make payments or receive them from correspondent banks in dollars.”
Other risks associated with sanctions include the possibility of a halt in foreign investment needed by the country to finance its current account deficit, as well as the possibility of worsening relations with major trading partners. According to Nicola Brink, head of SARB’s financial stability department, even the very threat of sanctions could have a negative impact, since then foreign financial institutions can more carefully check transactions related to banks from South Africa.
May 11 US Ambassador to South Africa Ruben Brigety declaredthat the US authorities have evidence that in December last year, weapons were loaded onto the Lady R ship, owned by the Rosmorflot company, included in the US sanctions list. After that, the South African authorities reported the Government’s intention to conduct a thorough investigation into these allegations. Previously, they have repeatedly stated that the country adheres to a policy of non-alignment with regard to the situation in Ukraine.
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