The ongoing conflict between Russia and Ukraine, reintroduced the possibility of Russia becoming cut off from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). A similar strategy of excluding Russia from the Belgian-based system was proposed in 2014, after the Russian annexation of Crimea. This announcement led to a barrage of articles in Russian media stating that Russia can create its own provider of secured financial messaging services. And eventually, Russia set up the System for Transfer of Financial Messages (SPFS), used for its internal financial market. Prior to Russia’s invasion of Ukraine, SPFS served around 400 commercial banks, and has limited coverage compared to SWIFT.
There is speculation globally that there is a unique opportunity to establish an alternative global payment system, led by China and Russia. The Chinese Cross-Border Interbank Payment System (CIPS), established in 2015, and quoted in RMB, could be integrated with the Russian SPFS, sidelining the US dollar. The only remaining detail, would be to reach an agreement on which currency would be the base currency of this system – the Ruble or the RMB.
While this proposal is technically feasible and might stand as a probable scenario in not so distant future, there are reasons why such strategic cooperation between Russia and China may not be imminent.
First, the West could hardly push Russia entirely out of SWIFT without causing damage to its economies, as some are co-integrated with the Russian provision of resources, particularly natural gas.
Before the outbreak of World War One, the United Kingdom considered a similar strategy to target the German economy. British planners pondered if fast and decisive action to destabilize the German economy would also inflict severe damage to the global supply chain and the UK economy. Eventually, the plan was discarded as the effects to the global economy would transmit the relatively unpredictable ripple effects to the United Kingdom. Similarly, the global economy nowadays is highly interconnected, and Russian exclusion from the SWIFT would incur damages on both sides of the Ukrainian borders. As of writing a handful Russian banks have been cut off from SWIFT but Russia as a whole has not been.
Secondly, while considered allies in the media, Russia and China have a relationship based not entirely on trust. Russian elites are looking towards the West and see themselves as a part of the Western world. Furthermore, China would hardly unconditionally support Russia against the West. China also implicitly supported the financial sanctions of the West against Russia, limiting its financing for infrastructural projects in Russia after the annexation of Crimea in 2014.
While the Sino-Russian global payment system is technically possible and could include a limited number of states and regions, offering an alternative to SWIFT, it would require time and coordination. The Russians have already started courting India to join such a system. But the most significant challenge would be to obtain the political will and the readiness of global powers to stand against the West’s financial system, thus engaging in uncharted futures.