Cutting SWIFT, Sanctioning Central Bank of Russia

In the old literature on sanctions, costs imposed on the economy had to be pretty large in order to effect change (Hufbauer notes sanctions had an average impact around 2% of GDP, which wasn’t much; sanctions on Iraq were on the order of 5%). Those announced on Russia so far would not have that magnitude of impact in the short run (maybe different in the longer run). However, cutting off Russia from SWIFTin addition to other restrictions on financial transactions — might come closer. Sanctioning the Central Bank of Russia, apparently under consideration, might come yet closer.

From Bloomberg:

The move would be “devastating” for Russia, according to Tim Ash, a strategist at Bluebay Asset Management in London. “We would see the ruble crash.”

Although the decision would be without precedent for an economy the size of Russia’s, the U.S. has previously sanctioned the central banks of adversaries. In 2019, the Treasury Department blacklisted the monetary authorities of Iran and Venezuela for funneling money that supported destabilizing activities in the respective regions. North Korea’s central bank is also blacklisted.

Some discussion of sanctioning central banks (generally) here.

The article notes that the Central Bank has reduced its holdings of dollars – at June 2021, dollars were 16.4% of foreign exchange.

It’s not clear to me the impact on the Central Bank of Russia of the US sanctioning it are proportional to dollar holdings.



35 thoughts on “Cutting SWIFT, Sanctioning Central Bank of Russia

    1. Bruce Hall

      Arf, arf.

      Let’s hear your strategy for when these sanctions fail against Russia and China is emboldened to grab Taiwan and TSMC. What will POTUS do from his headquarters in Delaware?

      NATO is an empty shell militarily except for France. Britain has a reasonable navy and Air Force, but not much land based strength. Send in the Hungarians.

      Biden won’t stop importing Russian oil, so the U.S. financing the war in Ukraine.

      But consider this: if NATO doesn’t step up to stop the Russian advance in Ukraine, how long will it be until Ukrainian forces destroy Russian pipelines running through Ukraine (and possibly Belarus) to Western Europe? That would be a real sanction on Russia… and on the EU for not stepping up. If I were president of Ukraine and the outlook was dire, I’d strongly entertain that. After all, the 8% tax on Russian products going through the pipelines means nothing if there is no Ukrainian government to collect it.

      Question: where are Javelins and Stingers that should be fed to the Ukrainian forces? How about short range drones capable of carrying anti-personnel armaments? Soon the Ukrainians may be faced with having to fight a guerrilla warfare and they need asymmetrical weaponry. The Ukrainians are not going to go down quietly; they remember Russia under Stalin. But so far, NATO is not stepping up very much… mainly just watching the slaughter from the cheap seats in the Coliseum.

      Biden and pgl talk tough about sanctions, but that’s like saying you’ll take away the alfalfa from a charging bull. War is beyond conventional economics.

      For several years, there have been proposals for reimplementing the Lend Lease Act (weaponry) for Ukraine, but nothing has come of it. As intelligence began to suggest a potential Russian invasion, the Biden Administration refused to consider it. Now, after the fact, some in Congress are saying it should have been done. Shoulda, woulda, coulda. Maybe it will happen in a year or two as it works its way through DC bureaucracy.

      So, my Chicken Hawk defender of Bidenomics and Chamberlain diplomacy, what you gonna do when the well runs dry? Watch Russia take the Baltic states while China takes Taiwan and John Kerry asks them to remember climate change?

      1. pgl

        You know – I think everyone gets that you are a Putin fanboy because he is Trump’s mentor. You have zero integrity, zero caring for the people of Ukraine, and even zero respect for American democracy. So what you have to says has zero respect from anyone caring honest person.

      2. pgl

        “where are Javelins and Stingers that should be fed to the Ukrainian forces?”

        Well Zelensky never gave Trump dishonest dirt on Hunter Biden so it seems Trump held up this needed support. Of course Bruce Hall is Trump’s class clown so Bruce should have to address his own question.

      3. pgl

        Bruce Hall has decided some blogger named Christopher Foundation is the foreign policy expert. Did the dumbest troll read how Chris describes himself? Of course not:

        ‘I’ve always been annoyed by what passes for real estate “reporting”: glowing paeans to marvelous architecture, appeals to snobbery and always – always! a cheery view of the market. So I don’t do that (ask my former publisher): if a house is an over-priced POS I’ll point that out. If a house sells for half-its original asking price I’ll mention that too. And if I like a house, it won’t be because it’s my listing or an advertiser insists I give it a favorable mention. No advertising on this site. These are just my opinions, of course, and opinions are personal and, sometimes, dead wrong – feel free to disagree. I do sell real estate for a living, primarily as a buyer’s representative, not a seller’s, and I’m always happy to hear from readers or customers.’

        A real estate flipper who is even dumber that Finance 101 dropout Princeton Steve. Bruce Hall is even worse than Donald Trump at picking “expertise”!

  1. Steven Kopits

    There is a big downside to using sanctions against Russia broadly rather than military force against Russian troops in Ukraine specifically.

    Sanctions will not stop Putin, as President Biden himself has stated. If Ukraine falls and SWIFT and other sanctions are placed on, under what conditions would those later be removed? You are left with Merkel’s Dunce Cap Strategy, which has brought us to the situation we have now. That is, we are left with the endless punishment of the Russian people, when we have no indication that Putin has wide public support for this egregious invasion.

    The alternative is to fight and win this war, and then find a path — as I have already laid out — which sees the sanctions removed from Russia over a finite period of time, say, 18-36 months. There is a path forward to a better Europe across the zone.

    1. Baffling

      If you advocate for a direct conflict between two nuclear powers, you better be willing to accept whatever consequences result. I am not saying we dont end up in conflict, but somebody has to be the adult in the room at first. If we are going to start ww3, its hard to argue it should be done preemptively. We should not be in a race for that outcome. Nobody wins there.

      1. Steven Kopits

        I understand what you’re saying, Baffs. But if you allow another nuclear power to blackmail you, you’re pretty much finished. That’s the risk the other side took as well. That’s what Mutually Assured Destruction is all about.

        So, I understand what you’re saying, and I appreciate your take, but there is no way the US can ever buckle to nuclear blackmail.

    2. 2slugbaits

      Steven Kopits The alternative is to fight and win this war, and then find a path — as I have already laid out — which sees the sanctions removed from Russia over a finite period of time, say, 18-36 months.

      That’s a false choice. One obvious alternative would be for the Russians themselves to remove Putin from power…one way or another. Putin is not immortal even if he thinks he is. Putin might be willing to die in a nuclear inferno for the sake of his Ukrainian white whale, but I doubt that many of his fellow oligarchs and political hangers-on feel quite the same way.

      Incidentally, the MAD doctrine is more than just a simple case of promising to blow you up if you blow me up. Central to the execution of MAD is making sure that it is impossible for one side to launch a successful first strike that would remove the possibility of a counterstrike. That’s the rationale for a strategic triad. That’s the rationale for placing air bases and ICBM bases in specific locations across the continent. That’s why the Russians were always more concerned with throw weight and the Americans were always more concerned with circular error probabilities and the old “yield to the two-thirds power” rule.

      1. Steven Kopits

        Slugs –

        You are externalizing action. If only those Russians would overthrow their dictator! How good that would be for us!

        How often are dictators actually overthrown? Not that often. I don’t think you can predicate US policy, which has to be executed in the short term, on revolution in Russia. The US has to act. It can’t wait for some Russian revolution which may not happen for fifty years.

        As for MAD, yes, I am aware of the triad, etc. etc. The point is, you can’t cower even if threatened by nukes. This is a problem for Putin, too, not just for us. It’s a problem for the Russian people, not just us. If we cower, then it’s game over for every opponent big and small. North Korea can hold us hostage, for goodness sake.

        I think you can clearly see the weakness of the Biden Doctrine here. If Biden pre-emptively states that the US will not intervene military, and if the Germans send helmets, and if the Russian generals say, “Just as you say, President Putin, we can overrun Ukraine in two days,” well, that’s a problem. Putin may labor under the impression that he has been greenlighted for a walk-off invasion with only some sort of not too impressive sanctions are on order.

        I have stated over and over and over the risks of democratic governments to baiting dictators into war. Here we have it again.

        Now, the problem is that Putin is not only under institutional pressure, ie military resistance in Ukraine and economic calamity at home, he is also under tremendous personal pressure. He has sent thousands to die and put his country into a stranglehold. And his position, indeed, life or liberty may be on the line if he fails (ie, we have a principal/agent problem). He will be making decisions under enormous personal stress. Will he resort to nukes as a kind of ‘Hail Mary” solution?

        The failure to exercise adequate deterrence up front — and make no mistake, that is what the Biden Doctrine does — has invited Putin to try his hand, and now that his play is in tatters, he may resort to ever more desperate measures. I trust this won’t go nuclear, but that fact that we’re having this conversation at all is a measure of the disaster of the Biden Doctrine.

        1. 2slugbaits

          Steven Kopits You’re being inconsistent. At the top of your post you claimed that dictators are seldom overthrown; but then towards the end you pointed out that Putin is under “tremendous personal pressure.” Which is it? You can’t have it both ways.

          Putin might be in charge, but he is not the one who would actually have to execute a “Hail Mary” solution. As I said before, just because he wants to chase his white whale doesn’t mean the rest of his entourage wants to take that same adventure. It’s precisely because he is so isolated that makes it more likely key people would simply disobey such an order from Putin.

          My only problem with Biden’s handling of this is that I think he should have begun pumping up our military support much sooner and much more aggressively. The Ukrainians really needed a lot more air defense and surface-to-air missiles.

    1. Moses Herzog

      Great catch. Extremely interesting. You have to think Putin thought of this already and “insulated” himself/Russia from damage?? But this is very very interesting. I hope the financial media will dig on this, as well as U.S. officials etc.

      BTW, Poland/Polska have been real heroes on this thing. I think that there should be serious consideration that the next Nobel Peace Prize be awarded to the citizens and/or nation of Poland for their heroic deeds during this time. Certainly would get my vote.

    1. pgl

      I guess the Vietnamese think they are being “fair and balanced” Fox News style. Disappointing that they can not stand up to obvious evil.

      1. Moses Herzog

        If you read the ENTIRE article, the point of the article is that the Viêt Nam state news is not taking their usual tact, and is not as pro-Russia as they normally are. I think we’ll take this as a “What About Bob” baby step here, and call it a win.

    1. Moses Herzog

      You’re here to provide comedy for the blog I assume. I haven’t read satire comedy this spectacular, since 10 days ago when Barkley Rosser told us there would be no invasion of Ukraine. Let’s go back to the video tape replay, shall we??

      Barkley Rosser said: “Do keep in mind I am the one here with access to Russian media. That has now been blaring for several days that the troops will go home after the exercises are done, and exercises are exactly what they are doing now. This has more recently been reinforced by statements from Putin in press conferences, such as the one just held after the visit of German Chancellor Scholze.

      There is not going to be an invasion, even if some of the details of what Zelensky and Ukraine may agree to are not fully settled, and Victoria Nuland has been shooting her mouth off too much, somebody I wish was not part of this administration.”

      That was exactly 10 days ago. Barkley also wants everyone to know that Putin was “very convincing” about Russian troops “just doing exercises” in Belarus near the northern border of Ukraine. I mean when a boy scout like Vladimir Putin tells you “the army is just doing exercises” by another nation’s border, why would you disbelieve a boy scout and man of religion like Putin?? Certainly an “expert on Russia” wouldn’t doubt him. Errrrr, uh, I guess that’s how Barkley Junior feels about it.

      1. pgl

        ltr has turned into an apologist for Putin so we should file her comments in the same trash bin that we file that Putin fanboy fluff ala Bruce Hall.

        1. ltr

          Following ——- lead on everything like a —– little sister…

          — has turned into an apologist for…
          — has turned into an apologist for…
          — has turned into an apologist for…

          [ Using and failing to immediately apologize for using an intolerable slur, is not covered by threatening falseness. ]

  2. rsm

    Can Russia hack SWIFT? How is North Korea getting dollars, by hacking and private dollar bond sales through The Franklin Group, amirite?

        1. Noneconomist

          Every post, you’re sounding more like the Tasmanian Devil chewing his way through a Bugs Bunny cartoon.

  3. Gregory Bott

    One thing about Putin is he has been good at manipulating “right hegelians” and enhancing their political capital in the “West”. Likewise, his chummy relationship with Lukud should not be forgotten. The Oligarchs financed their operations quite a bit(Alex Jones was bankrupt in 2010 essentially before VTB bailed him out) and gave them sounding boards of dark money. But like all things, its a con. Just not the Republican party, but the Putin/Soviet mechanism’s themselves that still exist. My guess certain Christian groups should probably begin to fear. If you aren’t Orthodox, you are in trouble. Evangelical Christians beware.
    Putin knows this is the endgame. The goal: rebuild the iron curtain. Destroy US capital markets in debt liquidation and rebuild “East Asia” with China. This really is the end of globalism. Republicans are like Democrats in 1980. Lost and afraid. The party is ending for debt expansion for consumption. Fixed prices, heavily regulated markets and worker advantage in arbitration is the future. What the US can develop and build, is what we will have. Republicans are a mess. They were dead in 2008, but awoke to find a new source of help in a old enemy. But that help wasn’t pure. They had to know it. Now a neoLeninist uprising has began. Maybe they can hug their Wall Street lackeys. The titanic is going down on the Reagan era, finally.

    1. Baffling

      Remember the old commercial “this is your brain on drugs”
      Well, this is your brain on conspiracy theories.

  4. Steven Kopits

    Let’s try this again, from yesterday (a long time just now):

    My latest in The American Thinker.

    I argue that Putin is essentially taking advantage of the Biden Doctrine, which the President laid down at Arlington Cemetery last April. In effect, Biden declared his intent to elevate the prevention of military deaths in the field over national interest or honor. This essentially laid open Ukraine as a target for invasion by Putin’s Russia. Former President Trump was spot on in his analysis, saying “This is genius. Putin declares a big portion of Ukraine … as independent. How smart is that! And he’s going to go in and be a peacekeeper. That’s pretty savvy. And you know what the response was from Biden? There was no response.”

    Trump holds that the invasion of Ukraine would never have happened on his watch, and I think the evidence suggests this to be true. First, although Trump talked a lot about pulling out of Afghanistan, in four years, he never actually did it. Biden did withdraw, and the method chosen demonstrated that the Biden administration had no stomach to hold its ground. Moreover, Trump would never have given the Arlington speech. Further, Trump showed a willingness to put it to the enemy with the assassination of Iranian General Soleimani. But most importantly, Trump shares a common characteristic with Putin and Xi: an absolute fear of being seen as a loser. Trump could not sit by and do nothing, and Putin knows that. He knows Trump would have called Putin’s bluff.

    What’s more, the American public agrees with this view. According to a Harvard-Harris poll released Friday, 62 percent of those responding believed Putin would not be moving against Ukraine if Trump had been president. That is a huge problem for President Biden and the Democrats. If Ukraine falls, those two of every three voters will blame the Biden administration, and that blame will manifest itself come the November elections. I had earlier stated the Democrats should put themselves on suicide watch over the Open Borders policy. If Ukraine falls, forget suicide watch. The Democrats should bite their cyanide capsules and say goodbye, because the party will be pegged as unfit to protect America. Voters can forgive much, but not national humiliation at the hands of America’s chief rival, and a two-bit one at that.

    So what can Democrats do? I am no military expert, but what I can find on the internet (here and here and here, for example) suggests that the US could beat the Russians with comparative ease:

    The Russians cannot fight a modern war and their bullying capability is limited and would be ineffective against NATO’s air power alone[.] … A US-Russian war would look like Iraq ’91, both by overwhelming asymmetry and by multilateral coalition backing.

    If Biden wants to save the Democratic Party, he has virtually no choice but to let US air power off the leash. Based on the 9/11 precedent, if Biden succeeds, it is worth +35% net approval points:

    Interestingly, the Republican Party, currently wavering over the position it should take, would also benefit from a hard line against Putin. If Republicans call for military intervention and Biden fails to act, then the right can say that Biden betrayed both Ukraine and the US. That would be the expected case outcome. If Biden fights and the US wins, then at least the Republicans will have limited the damage to their own party by being on the bandwagon. (There is nothing worse for a conservative than being pegged as a coward.) Finally, if the US fights and Ukraine falls anyway, Republicans can blame Biden for having chosen the wrong method. The Republicans would seem to benefit from taking a hard line in most outcomes.

    My personal view: Let US air power into the game. We have paid a boatload (more like an aircraft carrier load) of money to Boeing, Northrop Grumman and other vendors for state of the art air power. Let’s call Putin’s bluff and see what our equipment can do.

    1. pgl

      I read this gibberish earlier and noted reading it wasted my time. And you remind us that you write garbage for such a rightwing rag?

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