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Expert Says Disconnection of SWIFT in Belarus Is 25-Years-Long Step Back

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Expert Says Disconnection of SWIFT in Belarus Is 25-Years-Long Step Back

The consequences will be very serious.

President of the Lithuanian Industrial Confederation Vidmantas Yanulevicius said that the disconnection of Belarus from the international banking SWIFT system is just a matter of time.

Charter97.org asked economist Leu Marholin to assess the consequences of Belarus's disconnection from SWIFT:

- There have been only few disconnections, so there's no big analysis. It depends on the volume of foreign economic activity of a country. Given that Belarus is a small open economy, which exports a significant share of its production and receives goods and raw materials through imports, the volume of international settlements is naturally quite significant. In this case, disconnection from SWIFT would mean going back at least 25 years.

In theory, one can do without SWIFT. As former chairman of the National Bank Stanislav Bogdankevich said: money can also be carried in suitcases. Of course, no one will do it, but one can carry documents. One can send them from bank to bank by some other means of communication, such as fax, e-mail, and so on. However, it complicates the process and slows it down a lot. If one remembers the early 90s when intensive international settlements began, and there was no SWIFT system yet, there were transactions between firms in different countries that lasted up to 3 days. At that time, they used telex, teletype and other similar means of communication.

What other methods of international settlements may be used? Through some Russian banks. Let's assume that a Belarusian company opens a correspondent account in a Russian bank and makes payments through it. However, it will also be quite difficult, as there will be some mechanisms to avoid sanctions. Therefore, without going into details, I can say the consequences will be serious.

Any slowdown in settlements in the 21st century is a serious problem. If a company expects money from abroad within a certain time frame, for example, it has to do with paying taxes or paying some other suppliers, then it can all come crashing down. It's just like you take a multi-leg flight and expect to arrive in Frankfurt at a certain time. The plane is late, so you already lose the opportunity to take another flight.

The same thing is here: you expect money, but you don't receive it in time. It may be just the opposite. You undertook to pay on time, but the money could not be sent, respectively, your contractors will try to avoid cooperation with you or will switch to prepayment, which is very difficult in our time.

It is hard to enumerate all the possible consequences, but they are very serious all the same.

- Some Belarusian banks have already undergone problems with payments through SWIFT. Clients of eight Belarusian banks have complained en masse about the problems. What do you think, is it the first signal that Belarus may find itself without SWIFT?

- Absolutely. The fact is that the clerk in a foreign bank always wants to double-check. One should not expect such great specialists, who can memorize all instructions by heart. Many of them, as soon as they see the word Belarus or a bank, which they think is under sanctions, first of all, try to double-check. At best, they put the payment note aside and consult with their bosses. Or they may send it back at all. These are isolated signals. If SWIFT is cut off, it will be much more serious.

- Absolutbank under U.S. sanctions has stopped operations with dollars. Will this become a reality for Belarusian banks?

- In any case, those banks under the U.S. sanctions will have to stop operations with dollars because they are held through correspondent accounts in American banks. It happens as follows: a Belarusian company with an account in Absolutbank wants to pay for some transaction, let's say, with a Brazilian company, to which it provides services or buys goods in dollars because neither the Belarusian nor the Brazilian currency is quoted on the international market. The bank transfers funds of this company to the correspondent account in an American bank. There they are transferred to the account of the Brazilian company. If the bank is sanctioned, it means the U.S. banks will perform no actions with the currency. Even if there are funds in dollars in the correspondent account of this American bank, they will simply be frozen.

It means that this bank will only be able to work with Belarusian rubles, or, if there are no sanctions, in some other currencies, depending on where the correspondent accounts are opened. As a rule, the U.S. sanctions are followed by sanctions of other European countries, which restrict actions with the euro, the Swiss franc, the currencies of Japan and Great Britain. And these are almost all international reserve currencies that are widely used. Everything else is exotic.

- How much will the Belarusian economy slow down because of the SWIFT disconnection?

- You see, it is almost impossible to quantify it now, because, as they say, you should try. The thing is that some companies will seek workarounds for payments, while others look for alternative suppliers or buyers, and some firms will negotiate with other currencies.

And different industries would suffer in different ways. Those industries that are associated with imports and exports will suffer to a greater extent. Businesses that depend little on exports and imports may suffer little. Only one thing is clear: the impact and consequences will be severe. This is the only thing I can say.

- Early last week, sanctions against the regime in Belarus were imposed by the United Kingdom, the United States, Canada and Switzerland. How would you assess them?

- They differ from those previously imposed by the European Union since there are no exceptions for this or that type of export. For example, the European Union, when it imposed sanctions against potash fertilizers, made an exception for certain types. The U.S. and other countries did not do this. On the other hand, the EU imposed sectoral sanctions, which apply to all products mentioned in these sanctions, regardless of who sells them. That is, it does not matter who sells potash fertilizers, Belaruskali itself or some intermediary.

The Americans have not imposed such sectoral sanctions. If Belaruskali products are sold by some Russian companies, they do not seem to fall under sanctions. On the other hand, the Americans, unlike the Europeans, have pointed to the possibility of secondary sanctions, that is, restrictions against those who help the Belarusian enterprises to circumvent the sanctions. I think that sanctions will be quite an unpleasant surprise for the Belarusian authorities.

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