During
the ruble crisis of 2014/15 Russia announced in the wake of U.S. and European
sanctions over reunifying with Crimea that it would begin building a domestic
electronic financial transfer system, an alternative to SWIFT.
That
system, System for Transfer of Financial Messages (SPFS), is not only now
functioning in Russia, according to a report from RT it
now handles the financial transfer data for more than half of Russia’s
institutions.
According to Anatoly Aksakov, head of the Russian
parliamentary committee on financial markets:
The number of users of our internal financial messages’
transfer system is now greater than that of those using SWIFT. We’re already
holding talks with China, Iran and Turkey, along with several other countries,
on linking our system with their systems,” Aksakov said.
“They need to be properly integrated with each other in
order to avoid any problems with using the countries’ internal financial
messaging systems.”
This is a follow up to last month’s boast by the Russians that
their system was seeing a lot of international interest. How much of this
is boast and how much of it is reality remains to be seen, but the important
point here is that the minute the U.S. weaponized SWIFT for use in its foreign
policy, something like this was bound to occur.
China has its own internal system. And other countries are
building theirs as well.
The
SWIFT Cost
A common theme on this blog is that control is an
illusion. Power is ephemeral. The best way to exercise your power
is to have it but never use it. Because once you do use it you define for
your enemies the costs of their lack of compliance to your edicts.
And if there is one thing humans are good at it is responding to
known incentives. Once we can calculate the cost of one behavior over
another we can then decide which one is more important to us.
Once costs of staying in SWIFT rise above the benefits of
building your own alternative, you build an alternative.
SWIFT is a market power similar to a CEO having billions in
restricted stock in their company. A lot of hay is made about the net
worth of people like Jeff Bezos and Mark Zuckerberg.
Quoting their net worth by multiplying their known holdings
times the current price of the stock is useless. Because they can’t sell
it. It is market power or perceived wealth that evaporates the moment
they signal to the market their intention to sell.
In reality, if they tried to sell their stock all at once the
value of the stock would plummet as buyers would run for the hills and they
would realize far less than their stated net worth before the selling began.
So, if anything they are a captive of their own success, needing
to manage the creation carefully to avoid damaging its reputation, market
position and, ultimately, its business.
SWIFT is a monopoly system, a monopoly born of convenience and
inertia thanks to it being neutral to whims of international political
spats. Enter the late stage of imperial thinking in the U.S. where our
control over world affairs is waning first in the hearts and minds of various
people around the world and then in policy and you have the beginning of the
end of SWIFT as the only international financial transfer system.
Back in 2010, I remember Jim Sinclair banging his shoe on the
table about our threatening Switzerland over opening up its customer data
looking for ‘tax cheats’ under FATCA. He said then that the Obama
administration was idiotic for doing this.
This is
where I got the maxim, once you go nuclear you have no
other option.
And he was right.
Then Iran was cut out of SWIFT in 2012 to effect regime change
which also failed. And that woke the world up to the reality. The
U.S. and Europe will attempt to destroy your livelihood if you dare oppose its
unilateral demands.
Our
political and financial elites, The Davos Crowd, will
stop at literally nothing to ensure your compliance.
Too bad that SWIFT is just code. It’s just an encrypted
messaging system. And like the push to stifle alternative voices on
social media — de-platforming Alex Jones and Gab for examples — the solution to
authoritarian control is not fighting fire with fire, but technology.
And that’s exactly what Russia has done. They applied
themselves, spent the money and wrote their own code. Code is, after all,
hard to control.
De-coding
SWIFT’s Power
It is
also what is happening all over the Internet communications supply chain right
now. The infrastructure independent content producers need to resist
corporate control is being built and will see their businesses rise as so many
more people are now woke to the
reality of the situation.
As Russian banks and businesses reap the benefits of no longer
existing under SWIFT’s Sword of Damocles, others will see the same benefits.
I’ve been making this point all year, the more the Trump
administration uses tariffs and sanctions to achieve its political goals the
more it will ultimately weaken the U.S.’s position worldwide. It won’t
happen overnight.
It will build, gradually, steadily until one day the threat will
no longer be there.
We may have already reached that moment as President Trump has
ruled out pressuring SWIFT to cut Iran out of the system. Too bad his
evil Treasury Secretary Steve Mnuchin doesn’t agree with him.
But, Mnuchin is living in the past, he doesn’t respect the
resistance that’s forming to U.S. financial hegemony. He will though when
it proves ineffectual.
Russia’s SPFS will gain clients across Iran, Turkey, China and
the rest of its close trading partners. This will accelerate the
de-dollarization of Russia’s main trade, hydrocarbons, since many of these
countries are major buyers of Russian oil.
When you hear the announcement from a German bank under
sanctions from the U.S. for trading in Russian energy that it will use SPFS as
its transfer system, that will be the real wake up call to the markets.
Change then will comes, forgive the obvious pun, swiftly.