Might SWIFT Exclusion of Russians Also Harm Some Croatian Enterprises?

By 28 February 2022

February the 28th, 2022 - The European Union and powerful non-EU European countries such as the United Kingdom have imposed some of the harshest possible sanctions on Russia following its unjustified invasion of Ukraine just a few days ago. The exclusion of Russia from the SWIFT system is among the harshest, but could it have negative effects for Croatian enterprises as well?

As Jutarnji/Novac/Vedran Marjanovic writes, Croatian consultant Goran Saravanja explained that Russia's exclusion from SWIFT is primarily aimed at financially depleting the Russian Federation, hindering the international trade of the Russian economy, its exports, but also the import of what it lacks. Economist Drago Jakovcevic, however, warned that Croatian enterprises will also suffer as a result of the move, for example, in the form of the collection of goods delivered to Russia.

How the expected expulsion of Russia from the international SWIFT system for financial transactions will be seen in practice remains to be seen, but the consequences will certainly be borne by Croatian enterprises which have to charge for their exported goods to Russia.

''The exclusion of Russia from SWIFT is certainly a fair measure towards Russia, because such aggression against one country, as Russia has undertaken against Ukraine, has not been seen since World War II. This is the least that can be done out of solidarity with Ukraine,'' Jakovcevic said in reference to the decision of the United States and its allies here in Europe to expel Russia from the SWIFT system.

The full name of the SWIFT system is the Society for Worldwide Interbank Financial Telecommunication and it serves commercial banks and other financial service providers as a communication platform and not, as can often be heard, as an international payment system. The expulsion of Russia from SWIFT means that for all those who do business with Russia, business operations will be much more difficult, expensive and uncertain. This includes a list of Croatian enterprises which are now in difficult circumstances.

''The announced exclusion of Russian banks from the SWIFT system is part of a package of sanctions that the EU, the UK and the US have already imposed or intend to impose on Russia, so the decision in relation to SWIFT should be viewed in this context,'' commented consultant Goran Saravanja, adding that that context is the financial depletion of Russia.

''We can see that energy and food are currently excluded from Russia's sanctions, as resources that can be imported from that country. If we talk about the effects of excluding a country from the SWIFT system, we should take into account the fact that Russia isn't actually the first country to have this happen to them, one other example is Iran. And as we know, even after being expelled from SWIFT, Iran continued, for example, to export oil, recording, however, a significant drop in revenue,'' Saravanja noted.

Drago Jakovcevic pointed out that the expulsion of Russia from SWIFT, which is imminent, will not only affect Russian banks, but also companies and regular residents of that enormous country.

''Pulling Russia out of SWIFT has the function of discouraging it, making it more expensive and making doing any business with Russia much more difficult. Apart from Russia's economic and financial isolation, its exclusion from the SWIFT system has the function of preventing those in the rest of the world who are now preparing to make money from the devaluation of the ruble from doing so,'' Jakovcevic pointed out.

In support of the statement is the statement of former Russian Finance Minister Alexei Kudrin that the expulsion from SWIFT could cost Russia a drop in its GDP by five percent a year. Kudrin made the statement during one of the previous announcements of the USA and its allies that Russia would be expelled from SWIFT, but that the move was very appropriate for the current moment since the SWIFT blockade is just one form of the latest portion of sanctions against Moscow for attacking Ukraine.

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