With the SWIFT ban imposed on Russia by Western Allies, to prohibit a set of Russian banks from the global payment system, analysts have predicted that the oil pieces may surge well over USD 100 a barrel.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is an extremely secure messaging and information system that helps in faster cross-border payments, thus making the global trade smooth.
With the sanctions in place and furthermore being imposed with every minute, all commodities exported by Russia will be severely hit, from oil to metal to grains. Until the details of the exemptions will be furnished t related to the sanctions, the trade outflows to western countries will remain severely disrupted, said oil and commodity traders.
Amrita Sen of Energy Aspects consultancy said that the Brent crude oil price will certainly cross the USD 100 per barrel limit and may reach USD 105 per barrel. Even reaching USD 110 price can’t be ruled out.
SWIFT Alternatives?
Although the SWIFT ban may prove to be very disruptive for Russia, there is an alternate system in place called the System for Transfer of Financial Messages (SPFS) which Russia had set up after the annexation of Crimea in 2014.
Also, China has a system called the Cross-Border Interbank Payment System or the CIPS. Also, expelling Russian banks from the SWIFT might push Russia closer to China, which is very eager to undermine the dominance of the global US dollar-based financial system.
But, China may not be willing to help Russia at this stage as, unlike Russia, it has a gigantic import-export relationship with the rest of the world and won’t like to lose its’ trade and get burnt.
