Russia-Ukraine: If Biden’s Sanctions Produce Inflation, Nehru Could Have the Last Laugh

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After a lot of debate about his desire, the US bunches bullets and removes some of the leading Russian banks from the Swift Messaging System (Society for Interbank Financial Telecommunication). Swift connects more than 11,000 banks in more than 200 countries on a common transactional information platform.

This might be the hardest economic sanction against Russia until now.

Appointed from this system will cause a lot of pain and disruption in Russian international trade carried out through leading banks. It’s like SBI, Canara, HDFC and ICICI Bank – holding almost 50% of Bank Indian assets, including regular credit for large and small exporters – suddenly thrown out of the global banking information system.

Iran is believed to have lost more than 30-40% of its trade, including in oil and gas exports, when removed from Swift in 2012 after being approved by the US.

News report said President Joe Biden must convince some of the main European Union before imposing the latest size. Germany, which depends on Russian gas for more than 30% of its needs, has legitimate concerns about the scale of disruption of energy exports from Russia. On the one hand, this is the Putin Trump card, which has the potential to divide the US and the EU on the nature of sanctions. US is almost independent in energy.

However, the US managed to find a middle ground with the EU, namely punishing Russia enough without truly crippling his energy trade. Throwing the Key of Russian banks from the Swift system will make ripples on the market, which leads to further hardening of oil prices from the current level of improvement. Crude oil has surged to $ 105 in response to Russian banks removed from Swift, and the ruble fell 30% against the dollar.

Previously, because global oil prices rose, it produced Russian heretical results that received higher income for the export of oil / gas! So some calibrated costs must be worn on Russia. Throwing Russian major banks from Swift will partly achieve that goal, crashing into Russian oil income significantly. Oil, gas, and related products account for nearly 50% of Russian exports and 35% of His GDP. The Western Alliance wants to strategically target this but also calculates blowback to the global economy.

Putin may have anticipated this and created parallel settings and banking arrangements through China and other non-hostile countries, which are very few now. Even North Korea has underground arrangements to export mineral resources. This is controlled by a political elite.

Putin is also a De-dollar of the Russian economy, with the help of China. It collects steps after the 2020 pandemic when almost 45% of trade between China and Russia is non-dollar denominations. China has also consciously carried out non-dollar trading with several countries. Some de-dollar trade by making large transactions in local currencies is also actively discussed in the Brics forum a few years ago.

Russia last year denominated the largest part of its foreign currency reserves in gold. It is the first country to have more official forex reserves in gold than in US dollars. Most major economies keep the largest discount (more than 50%) from their reserves in US dollars. It is seen as the safest fence. However, it has not been seen how to be prepared by Russia to fight the overall impact of some sanctions. The Russian stock market has fallen 35%, which may be an indicator of what is in front. We will find out fully damage to the Russian economy in a few months, if no diplomatic solution was found. If Russia is seriously injured, higher energy costs will cause pain in the global market. The price of wheat food may also move up as a Russian and Ukrainian account for more than 25% of global wheat production. This area is seen as Eurasian breadbasket.