For the past few days, everyone has been talking about an abbreviation: Swift. The Swift international payment system is used by banks to transfer money between them. And Germany uses Swift to pay its Russian gas bills. That is why the exclusion of Russia from the payment system is considered the sharpest weapon of sanctions. Chancellor Olaf Scholz has so far been reluctant to use it. Nevertheless, the course of the Russian attack on Ukraine shows that it would be right to exclude Russia from the alliance.
Now Scholz is not the only EU head of government to have reservations about using the harshest sanctions against Moscow. Not only in Germany, but also in countries like Austria and Italy, people are only too aware of their dependence on Russian oil and gas supplies.
Russian President Vladimir Putin would likely react to an exclusion from Swift by stopping the supply of raw materials. Cold apartments and even higher energy prices – many EU heads of government want to spare their people from such impositions. Additionally, Foreign Minister Annalena Baerbock pointed to another unpleasant consequence of Swift’s exclusion. Even remittances to Russia intended for humanitarian purposes would no longer reach their destination without Swift.
These are all serious considerations. But the heart of the problem is to stop Putin immediately and to dry up the financial sources of his war. Oil and gas revenues are the most important basis for Putin to start his war machine in eastern Ukraine and Belarus in the first place.
Putin is unlikely to be deterred in his race by the sanctions adopted so far at the EU level. This applies, for example, to the rather symbolic countermeasure of freezing any assets of the Kremlin leader in the EU.
The EU has launched two sanctions packages since Putin recognized the rebel regions of Luhansk and Donetsk earlier this week. However, they are only likely to have an effect in the medium term. An exclusion of Swift would have a completely different effect: it would have an immediate impact on Russian state revenues.
Given the debate over Swift, Chancellor Scholz said even tougher penalties should be kept in the quiver for further escalation. But such a wait-and-see approach only plays into the hands of Putin, whose strategy appears to be aimed at a military decapitation of Ukraine by seizing its capital, Kiev.
What are Scholz, Austrian Chancellor Karl Nehammer and Italian Prime Minister Mario Draghi waiting for? For the Kremlin’s flimsy offers of peace talks with Ukraine?
In this situation, the federal government has a short-term scenario and a long-term scenario. The short-term scenario concerns the next few weeks and this relatively mild winter. According to statements by European Commission President Ursula von der Leyen, Europe is on the right side when it comes to gas storage facilities, even if the Gazprom group were to stop deliveries with immediate effect. This should reduce the risk of a Russian Swift exclusion for Germany and other EU states.
Social compensation for high energy prices
The long-term scenario applies to the coming and following winters. Because Germany has failed to seriously engage in the diversification of its energy supply in recent years, dependence on Russian gas is expected to continue for several years. The alternative supply of liquefied gas, which along with the expansion of renewables is seen as the means of choice by Economy Minister Robert Habeck, will cost consumers dearly. This effect will have to be cushioned by compensation for the most vulnerable.
The risks of an exclusion of the Russian Swift should therefore not be underestimated. However, the long-term risks for Putin are even greater. It depends on Europe as the oil and gas sales market for the next few years. Whether China, for all its thirst for energy, can replace this sales market is debatable. Putin, too, would therefore have every reason to think twice about a complete overhaul of energy policy.