In February 2022, the Russian government ordered an invasion of Ukraine because they claim that Ukraine was violating aspects of an agreement between the two countries. Angry that Russia would invade a country unprovoked, an embargo against Russian banks was quickly passed, removing them from the SWIFT system.
But now, 6 months later, and Russia is actually doing better financially than they were before they were cut off from the world. In fact, they’ve used this time to create a blockchain alternative to the SWIFT program.
So what does this mean for Russia? And for other countries around the world? Read on to learn more.
What is SWIFT?
SWIFT is an acronym that stands for Society for Worldwide Interbank Financial Telecommunication and it is an organization that has been around since 1973 that establishes the standards used in financial transactions as well as supports a messaging system, so that money can be sent all around the globe.
Before SWIFT was created, moving money around the globe took time, and often hit many snags along the way. SWIFT did away with the roadblocks and streamlined the process, allowing over 200 countries to send money anywhere in the world.
Most banks in the world now use SWIFT, but they aren’t the only ones, as stock brokers and investment funds also use this program to open investment opportunities to those around the world.
Technically, SWIFT is a politically neutral organization, meaning it shouldn’t be affected when countries are in a disagreement or war with one another. But on March 1, 2022, SWIFT was called upon to disconnect Russia and Belarus from its systems, something which had only previously been done to Iranian banks. This was done in an effort to make it more difficult for the Russians to fund their war against Ukraine. They complied with the order.
Did Russian Sanctions Work?
In a short answer, no. Despite being disconnected from SWIFT, the Russian economy has actually been thriving because they are no longer hemorrhaging money to foreign oil investors. They are also able to better control their currency because of the closed borders and they are experiencing almost no inflation.
While the sanctions also called for countries all over the world to boycott Russian products, it was quickly discovered that this was impossible, and now many countries pay a premium for products they were going to purchase in the first place. This only increases Russian income.
Not only that, but the time away from SWIFT technology has actually given Russian technology institutions time to build a better SWIFT system. And they still have all the money they need to fund their war, in fact they have even more than they did before.
Russia’s Blockchain Swift
Obviously, for all its claims to being neutral, SWIFT was not in both the case in Iran as well as the recent Russian conflict. And although people everywhere think that boycotting Russia is the way to go, this entire incident has only shown that governments are too powerful, and having a system like SWIFT only makes them more powerful.
Whenever you make something decentralized, you give the power back to the people it belongs to, i.e. the users of the system, and that’s exactly what Russian technology aims to do. Each user of this new blockchain banking system would have equal access to all other users, and no user could prevent anyone else from using the system.
Believe it or not, this isn’t the first system like this Russia has invented in the last few months. It’s actually the second. The first is named CELLS and was developed in June by Rostec. Don’t brush this announcement off so quickly either, because already a dozen of countries have signed up, and it’s only July.
The reality is, the boycott of Russia is doing little to stop the Ukraine invasion, and at this point it’s just a standoff until Putin wants to get involved in foreign stocks again or the USA needs Russian oil that badly. Even as you may want to support Russia by not purchasing it’s products, the world cannot ignore inventions like this blockchain version of SWIFT.
For those of you that know was game theory is, at some point if this SWIFT alternative gets bigger, the USA will have to join, otherwise they will miss out on a world of global financial transactions.
A Better Way to Boycott Russia
Supporting a boycott of any type is generally not advised, because in most cases, these boycotts hurt the people and not the government itself (as most rulers can clearly get what they need no matter what).
Many people have supported the Russian boycott, saying that it will encourage the Russians to rise up against their government, but many people have forgotten that Russia is now shut off from the world, meaning they are likely being fed propaganda about how the rest of the world hates them, and likely know nothing of the aggression happening in Ukraine. Therefore they have not started a revolution yet, and it doesn’t look like they will anytime soon.
If you truly want to boycott Russia, it’s important to stop using the goods that come from Russia. Yes, this means you need to drive less. Start biking to work, or consider purchasing a fully electric vehicle like a Tesla. While you’re at it, turn off the gas in your home, and stop eating seafood or buying diamonds—as all of these products tend to come to the US through Russia.
Sounds miserable right? Well, while you are still using these products, the US still has to buy them from Russia. You might argue and say “well they aren’t buying it from Russia, they are buying from Vietnam!” Where do you think Vietnam suddenly got enough diamonds to support US markets? Exactly, many of these products are still being purchased from Russia and are done now at a premium—giving Russia more money to support their war.
Overall, there is little you can do on a personal level to stop Russian aggression, and whether the world likes it or not, Russia is making great technological strides during the supposed sanctions against them, so it may be time to change tactics when it comes to dealing with Russian aggression.