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Can Russia break the stranglehold of the West’s SWIFT money transfer system?

Washington’s first salvo was trying to get Visa and Mastercard to block Russian banks; now they’re aiming at SWIFT

The Saker

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(The Saker) – by Kakaouskia for the Saker blog

Greetings to the Saker community and readers.

For some time now, US and its vassal states and Russia are engaged in an economic war. The first salvo was when VISA and MasterCard – which are US based banking institutions – were forced to stop accepting transactions performed by cardholders of certain Russian banks. The latest indication, as Saker has mentioned in the near past is that the US government is thinking to block Russian access to the SWIFT system.

What is SWIFT

SWIFT is basically a cooperative message exchange system. It is targeted at banks, investment companies, money brokers, basically anyone which needs to transfer money from A to B. To use it you apply for membership; once accepted you get your SWIFT code plus some shares of the SWIFT cooperative, pay a one-off signup fee and from then on you pay per message (aka transaction) or per file sent, other processing / services fees plus an annual support fee. The value of fees and other charges depends on the membership level. Profits are distributed in a similar way. SWIFT also provides reports and other analytic features to help members generate more business.

The reason behind SWIFT’s success is the fact that it provides a standardized, secure and reliable way of moving money around. Regulatory compliance is expensive as it requires constant, dedicated, high quality manpower to monitor, develop, implement, test and deploy changes to IT systems and networks as well as business processes. Thus, banks and other financial institutions prefer to have someone else take care of all such requirements.

Impact of kicking Russia out of SWIFT

The immediate effect will be the inability to exchange SWIFT messages between Russian members of the SWIFT system and the rest. Note that SWIFT itself does not facilitate the actual money transfer; all it does is exchanging money orders – the fund transfer must take place using mechanisms and under the agreements that the two exchanging institutions already have in place. As such, while it will become more risky and difficult to transfer money – not to mention more expensive – money transfers cannot be completely stopped. Such difficulties will drive Russian investors to seek other more investor-friendly destinations for their money; this will probably hit the EU quite hard as it is a favourable place for Russian investment. Consider this scenario: you have 1 million which you like to invest. You go to your bank, tell them you like to transfer said million to country X and the teller comes back and says “we can do that, however it is deemed high-risk and as such please sign a waver that if something happens to your million, bank bears zero responsibility”. Of course you can insist to proceed with the transfer, however a safe bet is that the majority of people will chose a less risky destination.

SWIFT also stands to lose. Communication is a two-way street which means messages go from and to Russia. If one assumes 10,000,000 daily Russia-related messages per day between SWIFT members, at the rate of €0,01 per message that is €36,500,000 per year in transaction fees alone. There is a good chance that a number of Russian institutions will either be removed or otherwise decide on their own that there is no more meaning in being a SWIFT member therefore there will be a loss of other fees, not to mention the cost of all the legal battles to sort out the contractual agreements.

Can Russia build an alternative to SWIFT?

Technically speaking – yes. In response to VISA’s and MasterCard’s boycott, Russia has launched NSPK as a replacement bank card scheme.

Allow me a few points on NSPK:

– As it stands now it is a card payment system and a direct response to the coercion by US government to VISA and MasterCard not to honour their agreements with Russian banks and stop accepting their own cards for which Russian banks paid licensing fees for the privilege of issuing them. The first six digits on any of your bank cards are called the BIN number; the logo on the card (VISA, AMEX, MasterCard etc) shows which scheme owns the BIN. Your bank – the issuer – pays said scheme a license fee to exclusively use that particular BIN and as such the scheme has to honour their end of the deal; that is ensure the card is accepted by all terminals brandishing the same logo. Few people know that VISA et al are in reality banking institutions.

– NSPK scheme has been active for a couple of years now; already a number of Russian banks use it. For the time being it operates only within Russia.

– The first iteration is a “Russianised” clone of China Union Pay scheme, which in itself is based off VISAs specs (properly licensed). I always laugh when thinking of the irony; instead of VISA making money out of card transactions made by Russians, they lose money while Russia is using their own design.

Russia can choose to repeat this by enhancing NSPK to function as a SWIFT alternative. NSPK could use the same file formats and mechanisms with SWIFT with different headers to allow proper identification, thus minimising needed system modifications on behalf of users. A big plus in this effort is that SWIFT messages are using an ISO standard, namely ISO20022. This will make development a whole lot easier and since ISO20022 is an open standard, no one can use any copyright claims to stop the alternative solution.

Next comes the question of the actual communications between the users of the new system. While everybody is using the Internet these days, few people realise that it relies on a backbone of backbones; a series of high-capacity cables – usually underwater – and satellites linked to extremely high-end routers utilising the BGP protocol to setup the paths for intra-county linking. While quite a few business entities can own a satellite or an underwater cable, only a handful have the technical know-how and expertise to create such infrastructure. US can go full retard and force the owners of such backbone elements (say AT&T) to block certain messages originating from Russia. Thankfully Russia is quite capable of building and deploying its own satellites and cables. It will be costly and time consuming, but it can be done. At first, existing infrastructure can be used for establishing communications between important business partners, most likely in Asia.

Finally, the big question is who will be accepting any SWIFT alternative? Here is were things get tough. US is certain to try and bully other countries into “either use SWIFT exclusively or else!”. This can even be achieved via the “ethical way” like it was attempted way back when Google cited pressure from society and people “to promote democracy and freedom of speech” in an effort to try to avoid following Chinese legislation while doing business in China. While users in countries like China probably will not be intimidated – who would like to lose Chinese investments – or can be allowed to work around the limits (example: keep the main business entity SWIFT only and set up a subsidiary for Russia only communications. The subsidiary is as such expendable and if one complains can be dissolved and replaced within a matter of days), smaller or vassal states (hello EU) can be bullied enough to go against their own interests. This has happened in the past between VISA and China Union Pay, and it took years of WTO litigation to resolve. Russian diplomacy will have to be very efficient and creative to overcome a global monopoly.

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Foreign Banks Are Embracing Russia’s Alternative To SWIFT, Moscow Says

Given its status as a major energy exporter, Russia has leverage that could help attract partners to its new SWIFT alternative.

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Via Zerohedge


On Friday, one day after Russia and China pledged to reduce their reliance on the dollar by increasing the amount of bilateral trade conducted in rubles and yuan (a goal toward which much progress has already been made over the past three years), Russia’s Central Bank provided the latest update on Moscow’s alternative to US-dominated international payments network SWIFT.

Moscow started working on the project back in 2014, when international sanctions over Russia’s annexation of Crimea inspired fears that the country’s largest banks would soon be cut off from SWIFT which, though it’s based in Belgium and claims to be politically neutral, is effectively controlled by the US Treasury.

Today, the Russian alternative, known as the System for Transfer of Financial Messages, has attracted a modest amount of support within the Russian business community, with 416 Russian companies having joined as of September, including the Russian Federal Treasury and large state corporations likeGazprom Neft and Rosneft.

And now, eight months after a senior Russian official advised that “our banks are ready to turn off SWIFT,” it appears the system has reached another milestone in its development: It’s ready to take on international partners in the quest to de-dollarize and end the US’s leverage over the international financial system. A Russian official advised that non-residents will begin joining the system “this year,” according to RT.

“Non-residents will start connecting to us this year. People are already turning to us,”said First Deputy Governor of the Central Bank of Russia Olga Skorobogatova. Earlier, the official said that by using the alternative payment system foreign firms would be able to do business with sanctioned Russian companies.

Turkey, China, India and others are among the countries that might be interested in a SWIFT alternative, as Russian President Vladimir Putin pointed out in a speech earlier this month, the US’s willingness to blithely sanction countries from Iran to Venezuela and beyond will eventually rebound on the US economy by undermining the dollar’s status as the world’s reserve currency.

To be sure, the Russians aren’t the only ones building a SWIFT alternative to help avoid US sanctions. Russia and China, along with the European Union are launching an interbank payments network known as the Special Purpose Vehicle to help companies pursue “legitimate business with Iran” in defiance of US sanctions.

Given its status as a major energy exporter, Russia has leverage that could help attract partners to its new SWIFT alternative. For one, much of Europe is dependent on Russian natural gas and oil.

And as Russian trade with other US rivals increases, Moscow’s payments network will look increasingly attractive,particularly if buyers of Russian crude have no other alternatives to pay for their goods.

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US leaving INF will put nuclear non-proliferation at risk & may lead to ‘complete chaos’

The US is pulling out of a nuclear missile pact with Russia. The Intermediate-Range Nuclear Forces Treaty requires both countries to eliminate their short and medium-range atomic missiles.

The Duran

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Via RT


If the US ditches the Intermediate-Range Nuclear Forces Treaty (INF), it could collapse the entire nuclear non-proliferation system, and bring nuclear war even closer, Russian officials warn.

By ending the INF, Washington risks creating a domino effect which could endanger other landmark deals like the Strategic Arms Reduction Treaty (START) and collapse the existing non-proliferation mechanism as we know it, senior lawmaker Konstantin Kosachev said on Sunday.

The current iteration of the START treaty, which limits the deployment of all types of nuclear weapons, is due to expire in 2021. Kosachev, who chairs the Parliament’s Upper House Foreign Affairs Committee, warned that such an outcome pits mankind against “complete chaos in terms of nuclear weapons.”

“Now the US Western allies face a choice: either embarking on the same path, possibly leading to new war, or siding with common sense, at least for the sake of their self-preservation instinct.”

His remarks came after US President Donald Trump announced his intentions to “terminate” the INF, citing alleged violations of the deal by Russia.

Moscow has repeatedly denied undermining the treaty, pointing out that Trump has failed to produce any evidence of violations. Moreover, Russian officials insist that the deployment of US-made Mk 41 ground-based universal launching systems in Europe actually violates the agreement since the launchers are capable of firing mid-range cruise missiles.

Leonid Slutsky, who leads the Foreign Affairs Committee in parliament’s lower chamber, argued that Trump’s words are akin to placing “a huge mine under the whole disarmament process on the planet.”

The INF Treaty was signed in 1987 by then-President Ronald Reagan and Soviet leader Mikhail Gorbachev. The deal effectively bans the parties from having and developing short- and mid-range missiles of all types. According to the provisions, the US was obliged to destroy Pershing I and II launcher systems and BGM-109G Gryphon ground-launched cruise missiles. Moscow, meanwhile, pledged to remove the SS-20 and several other types of missiles from its nuclear arsenal.

Pershing missiles stationed in the US Army arsenal. © Hulton Archive / Getty Images ©

By scrapping the historic accord, Washington is trying to fulfill its “dream of a unipolar world,” a source within the Russian Foreign Ministry said.

“This decision fits into the US policy of ditching the international agreements which impose equal obligations on it and its partners, and render the ‘exceptionalism’ concept vulnerable.”

Deputy Foreign Minister Sergey Ryabkov denounced Trump’s threats as “blackmail” and said that Washington wants to dismantle the INF because it views the deal as a “problem” on its course for “total domination” in the military sphere.

The issue of nuclear arms treaties is too vital for national and global security to rush into hastily-made “emotional” decisions, the official explained. Russia is expecting to hear more on the US’ plans from Trump’s top security adviser, John Bolton, who is set to hold talks in Moscow tomorrow.

President Trump has been open about unilaterally pulling the US out of various international agreements if he deems them to be damaging to national interests. Earlier this year, Washington withdrew from the Joint Comprehensive Plan of Action (JCPOA) on the Iranian nuclear program. All other signatories to the landmark agreement, including Russia, China, and the EU, decided to stick to the deal, while blasting Trump for leaving.

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Kiev ‘Patriarch’ prepares to seize Moscow properties in Ukraine

Although Constantinople besought the Kiev church to stop property seizures, they were ignored and used, or perhaps, complicit.

Seraphim Hanisch

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The attack on the Eastern Orthodox Church, brought about by the US State Department and its proxies in Constantinople and Ukraine, is continuing. On October 20, 2018, the illegitimate “Kyiv (Kiev) Patriarchate”, led by Filaret Denisenko who is calling himself “Patriarch Filaret”, had a synodal meeting in which it changed the commemoration title of the leader of the church to include the Kyiv Caves and Pochaev Lavras.

This is a problem because Metropolitan Onuphry of the Ukrainian Orthodox Church which is canonically accepted and acts as a very autonomous church under the Moscow Patriarchate has these places under his pastoral care.

This move takes place only one week after Patriarch Bartholomew I of Constantinople unilaterally (and illegally) lifted the excommunications, depositions (removal from priestly ranks as punishment) and anathemas against Filaret and Makary that were imposed on them by the hierarchy of the Moscow Patriarchate.

These two censures are very serious matters in the Orthodox Church. Excommunication means that the person or church so considered cannot receive Holy Communion or any of the other Mysteries (called Sacraments in the West) in a neighboring local Orthodox Church. Anathema is even more serious, for this happens when a cleric disregards his excommunication and deposition (removal from the priesthood), and acts as a priest or a bishop anyway.

Filaret Denisenko received all these censures in 1992, and Patriarch Bartholomew accepted this decision at the time, as stated in a letter he sent to Moscow shortly after the censures. However, three years later, Patriarch Bartholomew received a group of Ukrainian autocephalist bishops called the Ukrainian Orthodox Church in the USA, who had been in communion with Filaret’s group. While this move may have been motivated by the factor of Bartholomew’s almost total isolation within Istanbul, Turkey, it is nonetheless non-canonical.

This year’s moves have far exceeded previous ones, though, and now the possibility for a real clash that could cost lives is raised. With Filaret’s “church” – really an agglomeration of Ukrainian ultranationalists and Neo-Nazis in the mix, plus millions of no doubt innocent Ukrainian faithful who are deluded about the problems of their church, challenging an existing arrangement regarding Ukraine and Russia’s two most holy sites, the results are not likely to be good at all.

Here is the report about today’s developments, reprinted in part from OrthoChristian.com:

Meeting today in Kiev, the Synod of the schismatic “Kiev Patriarchate” (KP) has officially changed the title of its primate, “Patriarch” Philaret, to include the Kiev Caves and Pochaev Lavras under his jurisdiction.

The primate’s new official title, as given on the site of the KP, is “His Holiness and Beatitude (name), Archbishop and Metropolitan of Kiev—Mother of the cities of Rus’, and Galicia, Patriarch of All Rus’-Ukraine, Svyaschenno-Archimandrite of the Holy Dormition Kiev Caves and Pochaev Lavras.”

…Thus, the KP Synod is declaring that “Patriarch” Philaret has jurisdiction over the Kiev Caves and Pochaev Lavras, although they are canonically under the omophorion of His Beatitude Metropolitan Onuphry of Kiev and All Ukraine, the primate of the canonical Ukrainian Orthodox Church.

Philaret and his followers and nationalistic radicals have continually proclaimed that they will take the Lavras for themselves.

This claim to the ancient and venerable monasteries comes after the Holy Synod of the Ecumenical Patriarchate announced that it had removed the anathema placed upon Philaret by the Russian Orthodox Church and had restored him to his hierarchical office. Philaret was a metropolitan of the canonical Church, becoming patriarch in his schismatic organization.

Representatives of the Ecumenical Patriarchate have clarified that they consider Philaret to be the “former Metropolitan of Kiev,” but he and his organization continue to consider him an active patriarch, with jurisdiction in Ukraine.

Constantinople’s statement also appealed to all in Ukraine to “avoid appropriation of churches, monasteries, and other properties,” which the Synod of the KP ignored in today’s decision.

The KP primate’s abbreviated title will be, “His Holiness (name), Patriarch of Kiev and All Rus’-Ukraine,” and the acceptable form for relations with other Local Churches is “His Beatitude Archbishop (name), Metropolitan of Kiev and All Rus’-Ukraine.”

The Russian Orthodox Church broke eucharistic communion and all relations with the Ecumenical Patriarchate over this matter earlier this week. Of the fourteen local Orthodox Churches recognized the world over, twelve have expressed the viewpoint that Constantinople’s move was in violation of the canons of the Holy Orthodox Church. Only one local Church supported Constantinople wholeheartedly, and all jurisdictions except Constantinople have appealed for an interOrthodox Synod to address and solve the Ukrainian matter in a legitimate manner.

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