After the Biden-Putin meeting: Will SWIFT deter Russia from invading Ukraine?
Presidents Joseph Biden of the United States and Vladimir Putin of Russia have agreed, in their December 7 video-dialogue, to create working groups that would address Russia’s concerns regarding Ukraine’s place in the European security order. Those concerns directly relate to Ukraine’s choice of a Western orientation and its relationship with the North Atlantic Treaty Organization (NATO) and the United States.
Just seeing Putin on an equal footing and on the par with the USA and having an bilateral official meeting with an US president unlike the sideline hand shaking with Trump at the G 20 Summit can be seen as a success for Putin. This would eradicate Obama’s perception of Russa as another „regional power“, even though Obama used this term to take the wind out of the propagnada sails of Russiahawks among the US republicans, who portrayed Putin as a new Soviet Union threat. Although Obama may have had good intentions, Putin perceived it as insulting and degrading . Sometimes you can’t please everyone. It is also interesting that the Jamestwon Foundation has pushed its series „Russia in Decline“ a little into the background . So let’s see what the working groups can achieve, especially since it no longer seems to be just about Ukraine. Ultimately, Putin is concerned with his place in a new multipolar world order, including in Europe.
Interviewed just ahead of the presidents’ encounter, Kremlin-connected analyst Fyodor Lukyanov had said that the dialogue would be deemed successful if Biden acknowledged Russia’s concerns and agreed to discuss them in appropriate working groups (TASS, December 7).
Biden seemingly acknowledged and agreed: “We look forward to having further meetings to discuss Russian concerns writ large with NATO, to make accommodations, to bring the temperature on the Eastern front down,” he explained the next day (YouTube, December 8).
Putin modestly credited Biden with this proposal: “I must say that it was the US president who formulated this idea, and I agreed with it” (Kremlin.ru, December 8). Attributing it to Biden lends it authority in Washington; or it at least helps defuse the mistrust that proposals carrying Putin’s byline would naturally encounter. However, Lukyanov’s preview of this event (see above) indicates that the proposal originated in the Kremlin.
Moscow looks eager to jump-start the process. It will present its proposals to the US side within a week, Putin announced the day after his conversation with Biden (Kremlin.ru, December 8).
According to Putin’s own summary the day after, he told Biden that “Russia needs reliable, legally binding guarantees that would rule out any further enlargement of NATO, as well as deployments of offensive weapons systems in countries that border on Russia” (TASS, Kremlin.ru, December 8). This is the tip of the policy iceberg—a newly developed policy of unprecedented ambition.
The Kremlin had until now framed the problem as if Ukraine’s putative NATO membership were the main point at stake. This framing has become outdated. Most member countries are obstinately keeping Ukraine out of NATO; and even the US under the Biden administration has withdrawn political support for Ukrainian NATO membership or even a Membership Action Plan (though, the US still supports Ukraine’s right to aspire to join NATO).
Moscow, however, is using the issue of Ukraine’s NATO aspirations as a hook with which to pull additional and even larger issues into the argument. These would include: Ukraine’s military and security relationships with the US and other countries on a bilateral basis, outside NATO’s framework; the foreign and security policies of Russia’s other non-NATO neighbors, in addition to Ukraine; and constraints on force levels in NATO member countries bordering on Russia, e.g. precluding the further placement of missile systems that can strike Russia. A series of Putin’s recent statements evince these objectives (Kremlin.ru, November 1, 18, 30, December 8; Globalaffairs.ru, November 24). The Kremlin is now aiming to have its say in these matters.
Biden has recognized that the Kremlin is reaching beyond Ukraine. His statement (see above) indicates a consent to discuss “NATO writ large,” with a view to “accommodating” Russia’s concerns on that level. His statement also indicates an intention to bring the United Kingdom, France, Germany and Italy (members of the Quint grouping alongside the US) to the table of negotiations with Russia. Leaders of the Quint countries have participated in several telephone conferences related to Ukraine of late; most recently in connection with the Biden-Putin dialogue. Poland and Romania, as NATO members and Ukraine’s neighbors with vital interests at stake, are not mentioned as deserving seats at this table.
Russia considers Ukraine’s foreign and security policies to be inseparably connected with Ukraine’s internal state organization. Moscow wants an internally fractured Ukraine with centrifugal forces blocking any coherent decision-making on national security and defense or indeed any coherent government. This is why Russia insists on “returning” the Russian-controlled Donbas to Ukraine with a “special status,” in practice a Russian state within the Ukrainian state and a permanent source of constitutional disputes. The Russia-dictated Minsk “agreement” forms the basis for such an arrangement in Ukraine. If applied, it would permanently consign Ukraine to a gray-zone status.
The Biden administration has apparently agreed with the Kremlin to implement this solution. Secretary of State Antony Blinken, Undersecretary Victoria Nuland, and National Security Advisor Jake Sullivan have all come out publicly in support of the Minsk “agreement” in close correlation with the Biden-Putin encounter.
Ukraine was left out of the White House’s preparations for the Biden-Putin discussion. It cannot be said that Biden presented a position pre-coordinated with Ukraine to Putin. The White House had also ignored Ukraine when greenlighting the Russian-owned Nord Stream Two pipeline, depriving Ukraine of massive transit revenue. Biden informed President Volodymyr Zelenskyy on December 9 about the Biden-Putin talks, post factum (Twitter.com/ZelenskyyUa, One Plus One TV, December 9).
Once again Russia is holding the West and Ukraine in suspense. For weeks, military experts have been studying satellite images of Russian troop movements near the border with Ukraine. Brussels and Washington are already threatening new sanctions, while the US government is apparently examining options for evacuating its citizens from Ukraine should Russia actually invade. Russian President Vladimir Putin seems to be enjoying the situation. He hardly missed a public appearance recently to poke at the West and the Ukraine. Putin once demanded written guarantees that he would refrain from further expansion of the NATO military alliance, speaking of Russia’s „red lines“. Sometimes when he appeared in front of Russian diplomats, he was pleased that Russia was keeping the West under tension and urged his foreign minister to „maintain this situation for as long as possible“. This is the only way to guarantee that Russian demands will be taken seriously. Only before the meeting with US President Joe Biden did Putin’s spokesman struck a more conciliatory tone.
But even if something like relaxation returns temporarily after the virtual summit on Tuesday. It shouldn’t last long. In order to understand what the Russian president is up to with his escalation rounds, it is worth looking behind the facade of his statements. Then Moscow’s medium- and long-term goals will become clear. In fact, in recent years, Vladimir Putin has left little doubt that he would like to strategically tie the former Soviet republics of Belarus and Ukraine to Russia. At least in an economic and political union under Moscow’s auspices, if not in a common state. Not for nothing did he consider the annexation of Crimea to be one of his greatest achievements. At the same time, the Russian President has emphasized several times that he essentially regards the peoples of Russia and Ukraine, but also of Belarus, as one nation. It was only this summer that Putin stated in an essay that Ukrainian independence was doomed to fail.
Much speaks against a Russian invasion At first glance, it seems logical that Putin could try to take Ukraine by force at some point. Nonetheless, most observers in Moscow, both close to the Kremlin and independent, see far less reason to think about a large-scale war between Russia and Ukraine than the public in the West or in Kiev. There are good arguments for this. On the one hand, the current deployment of Russian troops – we’re talking about 90,000 soldiers who can potentially be increased to 175,000 men – is far from being enough to overrun Ukraine quickly and without major casualties. In addition, Moscow would have to reckon with much tougher sanctions that go well beyond the closure of the controversial Nord Stream 2 gas pipeline. But more importantly, it is completely unclear how Putin should proceed with an occupied and hostile Ukraine. Making the country a permanent vassal in this brutal way seems unrealistic. Even in 2014, Russia had to stop its offensive in Ukraine primarily because the hope for broad support for pro-Russian separatists in parts of Ukraine west of Donetsk and Luhansk had not come true.
So far, the Kremlin has pursued a sit-out strategy vis-à-vis Ukraine and waited for an opportunity for renewed pressure. One of the pillars of this strategy in relation to Ukraine in recent years has been the controversial Minsk Agreement. If it were implemented, the now partially occupied eastern Ukraine would return to Kiev’s care. As a region under Russian influence and endowed with special rights, it could have a say in politics in Ukraine. Russia believes that it will permanently prevent Ukraine from tying closer to the West. At some point, the Kremlin strategists hope, the Ukrainians will lose faith in the European course and elect a pro-Russian government again. The Kremlin has therefore repeatedly emphasized that there is no alternative to the Minsk Agreement and that it is non-negotiable. Recently, however, it has become increasingly clear that this plan cannot work. The support among Russian-speaking Ukrainians for pro-Russia parties and movements remained manageable despite some respectable successes in elections. At the same time, Ukrainian President Volodymyr Zelensky made sure that a number of Russian-language TV channels, as mouthpieces for the Moscow-friendly opposition, have lost their license. The oligarch and Putin friend Viktor Medvedchuk, who financed the station, has been under house arrest for months. He is accused of treason.
At the same time, Kiev is investing in modernizing its army and purchasing new weapons. These include Turkish Bajraktar-type combat drones, which the separatists in the east of the country have so far had nothing to counteract. In addition, Kiev openly speaks out in favor of membership in NATO and carried out several exercises with the Western military alliance this year. So the tactic of sitting out did not bring Putin any closer to his goal. Rather, Moscow must fear that the status quo will shift to its disadvantage and that ts long-term goal of dragging Ukraine back into its own sphere of influence is becoming an unattainable distance. In the last few months in particular, the fear that Ukraine could militarily take back the breakaway territories in the east of the country has been growing in Moscow’s management. In the spring, Putin’s Donbass plenipotentiary Dmitry Kozak warned that a Ukrainian perception. Donbass would mean the end of Ukraine as a state. This may sound like a pipe dream among Moscow’s hardliners. But for Putin, such an option should appear quite realistic. Especially since the Ukrainian armed forces now have enough clout to at least crush the separatists, Moscow would not back them up.
The only way out for Putin now is to deter the Ukrainian leadership. The West should also be warned against further support. Dmitry Trenin, one of Moscow’s leading experts on security policy and head of the Carnegie Center think tank, described the Russian maneuvers in his most recent analysis as an attempt to deter opponents from actions that are undesirable for Russia. The success of this tactic, however, depends on how realistic the military threat is. At least in the latter, Vladimir Putin seems to have been successful so far. The extent to which this will permanently change the situation in Moscow’s favor remains doubtful. But even if the unlikely and hitherto unimaginable event occurs that NATO gives Russia written security guarantees and renounces any military assistance for Ukraine, that would only be a partial success for Putin. His real historical goal goes far beyond that and is in Kiev and Minsk.
In the event of an invasion, America is threatening Moscow not only with sanctions against Northstream 2 or economic sanctions, but also with “highly effective” financial sanctions. It is about the service provider SWIFT, which plays a central role in payment transactions worldwide. Exclusion from this would have serious consequences for Russia. The American government has hinted at what it threatens Russia with an invasion of Ukraine. Before speaking to Vladimir Putin on the phone, President Joe Biden spoke of the „most comprehensive and significant package of measures“ that would make it „very, very difficult“ for his interlocutor to attack the country. A senior official said that there had been intensive discussions with the European allies about“financial sanctions“ which „would cause significant and serious economic damage to the Russian economy“. As reported by several American media, this includes the separation of the country from the international payment service provider SWIFT, which is based in La Hulpe, on the southern outskirts of Brussels. It would be the sharpest sword in the West. The acronym stands for Society for Worldwide Interbank Financial Telecommunication. It is a platform on which financial services are processed worldwide.
More than 11,000 banks use a particularly secure telecommunications network to exchange standardized messages, for example with every transfer and every credit card payment. This is the money order, not the money itself. SWIFT does not have any accounts. The money is transferred either directly between two banks or via a third party who has a business relationship with the parties involved. SWIFT also makes this assignment.
The cooperative issues the so-called Bank Identifier Code (BIC), which is on every bank card. Every credit institution can be identified with this letter combination. The uniform IBAN code for individual accounts also goes back to the company founded in 1973. No financial transaction can take place without a secure payment order – this is the reason for its central role in the global financial system. In the current year, a good 9.6 billion messages were exchanged via SWIFT.
Iran has experienced what it means to be cut off from international payments. From 2012 to the beginning of 2016, data traffic with around thirty Iranian banks was interrupted due to EU sanctions related to the nuclear weapons program. „SWIFT is managed under Belgian law and has to comply with this decision, which has been confirmed by the government of the country in which it is domiciled,“ said the company, which sees itself as a „neutral actor“. This had devastating consequences for the Iranian economy. Oil supplies are billed in dollars, but exporters no longer had access to this system.
In addition, oil exports to the EU and America were banned. Exchange deals were still possible with Russia and China. But Iranian traders in Dubai, for example, had to pay for oil tankers in cash in order for them to run out at all. At the time, Iran lost almost half of its income from oil trading and a third of its foreign trade. The sanctions were instrumental in ensuring that Tehran returned to the negotiating table and concluded a comprehensive nuclear deal in 2015, as a result of which the sanctions were lifted. However, in 2018, the American President Donald Trump again imposed punitive measures that the Europeans did not agree with.
In autumn 2018, this also led to the exclusion from the SWIFT system. The company called this „regrettable,“ but gave in to American pressure. Representatives of major international banks sit on the supervisory board; The central banks of the G-10 industrialized countries also play a role. The attempt by several EU countries to establish an alternative exchange system at least for humanitarian goods (Instex) was unsuccessful. The demand to also exclude Russian banks from the SWIFT network was made in 2014 after Moscow annexed Crimea and destabilized eastern Ukraine. The then Russian Finance Minister Alexei Kudrin estimated that economic output would fall by five percent as a result. The Kremlin said such a move would amount to a „declaration of war“.
This is what the US Secretary of State Blinken alluded to when he threatened „highly effective economic measures“ „which we have refrained from in the past“ last week. After Moscow gathered troops on the border with Ukraine this spring, the EU Parliament called for Russia to be excluded from an invasion of SWIFT. more on the subject The Russian central bank has set up its own system for payment transactions since 2014. However, it only covers a quarter of intra-Russian transactions and can only be used in a few neighboring countries. The Bank of China from China has joined, but large western commercial banks are keeping their distance. The Chinese system, in which two dozen Russian banks participate, is also very limited: only two percent of global payments are processed in renminbi.
However, while Putin thinks about expanding against the West, Belarus and Ukraine, Russia´s Far East seems to be eroding further and the much praised Chinese- Russian trade doesn´t make it better. Or as Paul Globe at the Jamestown Foundation describes the Russian situation in his article
“Moscow’s Trade With China Leaves Russians in the Far East Hungry, Cold and Angry
Publication: Eurasia Daily Monitor Volume: 18 Issue: 184
December 9, 2021
It is often said that most people have little difficulty living in huts until someone builds a castle nearby; then, the poverty they are experiencing becomes unbearable, and their anger at those in the castle will inevitably grow. That adage certainly holds true for the Russian Far East, where the population is running short of food, fuel and basic services even as Moscow profits off the area’s trade with China. Not surprisingly, the people in the region are angry at China and Moscow; yet much of their ire is also directed at those closer to home who are seemingly more concerned with making money for themselves than ensuring that the basic needs of local residents are met. Some of them are protesting, but many more are leaving, creating both short-term and long-term problems for the regional and federal authorities.
The Kremlin has specifically prioritized trade with China, reducing both the amount of goods coming into the Russian Far East from other countries along the Pacific rim—which includes the United States, a leader in food supply to the region—and the amount of shipping capacity available to carry food and fuel from the southern parts of the Russian Far East to the northern and eastern parts. This trade policy has left Siberians facing serious shortages, inflation far greater than in other areas of Russia, and a rapidly expanding black market for basic goods. Moreover, these developments have compounded over the last two years because of President Vladimir Putin’s health care optimization program, which has closed hospitals and medical points in the region to save government money (Versia.ru, December 6; Sovsekretno.ru, November 26).
The population is growing desperate. More than 50,000 residents, an enormous share of the total population in the Far East, have signed a petition asking Putin to save them. “Children no longer see either fruits or yoghurt,” their appeal begins. “During the summer navigation period in 2021, only one ship arrived” at a local port. “In November, a second is planned, but in the meantime,” basic food products have run out. Airplanes have brought in some goods but hardly enough to meet the need. The local administration claims it is doing “everything that it can. But we fear for our health and the health of our children” (Sovsekretno.ru, November 26).
Simply, there are not enough ships to bring them food and accommodate the growing volume of trade with China, the signatories say. Yet Moscow has given priority to the latter rather than the former, leaving locals struggling to meet their basic needs. Moreover, all the talk about the development of the Northern Sea Route generally fails to focus on the eastern part of the maritime channel, which passes along the coast of the Russian Far East. Indeed, hopes that that route could supply the people in the region this year were dashed when six vessels were caught in the ice and Moscow lacked the icebreaker capacity to free them in a timely fashion. Such problems could, of course, be resolved in the future; but given the state of food and fuel availability in the Russian Far East now, the future may be too late. Most residents, in desperation, are thinking about leaving in order to save their own lives and those of their children. The petition warningly implies that a growing demographic crisis in Russia’s Far East may put that part of the country at greater risk of Chinese incursion—despite growing trade relations and Moscow’s talk of building new Russian cities in the Russian Far East (see EDM, April 7, 2020, September 14, 2021, October 25, 26, 2021; Windowoneurasia2.blogspot.com, September 7, 2017; TV Rain, August 6, 2021).
Because of the lack of maritime shipping capacity to service both Chinese trade and the provision of basic goods to Russians living along the Pacific coast north of Vladivostok and Nakhodka, some enterprising locals are turning to airplanes. Unfortunately, that effort has led to disasters. The crash of a Belarusian AN-12 near Irkutsk in early November occurred at least in part because the plane was overloaded with lemons destined for markets in the Russian Far East. Furthermore, a pilot of an Utair plane was stopped in Moscow when he tried to smuggle 700 kilograms of food to sell on the black market in Chukotka. It is certain that others have succeeded in using such channels, but so far this has done little to limit either skyrocketing inflation—which in some cases amounts to triple digits—or empty shelves in local stores (Sovsekretno.ru, November 26).
Residents in the Russian Far East have additional reasons for anger. On the one hand, despite promises from their own regional leaders and Moscow that more food is coming, they know that the central government has blocked supplies from the US, Argentina and Brazil in order to make room for Chinese goods. On the other hand, they are aware, especially in Chukotka, which is just across the Bering Strait from Alaska, that US residents there are warm and well-fed, while they are not. In short, in their eyes, Moscow has ignored them while it enriches itself with Chinese goods and keeps them from obtaining the provisions they need from other wealthy places that have supplied them well in the past (Sovsekretno.ru, November 26).
Some in the Russian Far East are protesting: not only sending appeals to Moscow but taking to the streets, as they did in Khabarovsk over the summer (Real Siberia, July 11; TRT, July 14; 7×7, July 19; Daily Storm, July 9). Most, however, recognize that they are too small in numbers and too far from the Russian capital to achieve their goals through demonstrations. As a result, they are voting with their feet, leaving their villages empty. The exodus has only accelerated during the COVID-19 pandemic, which magnified the region’s inability to guarantee adequate medical care (Real Siberia, November 30).
With this demographic decline, the Far East will face an ever-growing risk of Chinese neo-colonialism, especially since there will be almost no one left in this region to resist it.
However, the development in Russa´s Far East illustrates that Putin is willing to sacrifice the living standard of parts of his people to achieve his neoimperial goals of an Euraisan Union and the hoped-for role of Russia as a great power in a new multipolar world order. But as he also called the partly exclusion from SWIFT after the annexation of Crimea „a declaration of war“ , a total exclusion from SWIFT could make him even more aggressive, even cause political instablity in Russia. In this context the appeal from the former German ambassadors and generals including former NATO General Klaus Naumann calls for 2 year´s freeze for negotiations to get out of the escalation spiral. However, it will also depend on the factor whether the USA and the West can prevent a Ukrainian winter offensive on the Donbass which Putin for sure would answer with his own offensive- with or without SWIFT.