EU will cut off 7 Russian banks from SWIFT, with ordinary Russians facing consequences

On Wednesday, the European Union announced that within 10 days, it intends to remove seven Russian banks from the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, messaging system.

The list of sanctioned banks includes Russia’s second-largest bank, VTB Bank, alongside Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and VEB. Without access to SWIFT, which is a Belgian messaging system that connects over 11,000 financial institutions worldwide, Russian banks and, by proxy, the Russian economy are likely to endure severe losses. For example, Iran lost 30% of its foreign trade after being banned from SWIFT in 2012.

But, in context, sanctions have a more devastating impact on a nation’s citizens. Although no one knows for sure, estimates place Russian President Vladimir Putin’s wealth at billions of dollars, meaning that he can still live a relatively lavish life even if the vast majority of his net worth is reduced via these punitive measures.

However, the same cannot be said for the Russian people. According to data from XE, the Russian ruble has lost nearly 30% of its value since the invasion of Ukraine began last week. The economic repercussions are said to have devastated the savings of ordinary Russians. To make matters worse, the EU has also prohibited transferring euro banknotes to Russia.

Crypto trading volume is surging in part due to high demand from Russia and Ukraine, with both countries suffering severe risks of currency destabilization. Stablecoins, in particular, play a vital role in countries facing mounting sanctions. For example, Venezuelans described to Cointelegraph how they support their families by converting their local salary into Tether (USDT) via an app called Reserve amid ongoing hyperinflation. 

Similarly, “Ardashir,” a crypto enthusiast based in Iran whose name has been changed to protect their identity, previously described to Cointelegraph how digital currencies had become a vital instrument of accessing services amid sanctions against the country:

“We don’t have Visa, Mastercard or any type of credit card here. So, thanks to Bitcoin and crypto, we can buy items like Xbox, Apple gift cards, VPNs, flight tickets, etc.”

When asked about whether crypto plays a role in combating the inflation of the Iranian toman, Ardashir added:

“If you want to buy, for example, a box of matches today, it’s better to wait until tomorrow when it will be much cheaper as the real value of the toman falls. People thereby want to save the value of their money with digital currencies.”

The Russian ruble PLUNGED to a new all-time low of 122.24 RUB/USD while trading today. Conflict with #Ukraine is taking its toll on the ruble, which has now lost as much as 37.7% of its value against the USD since Jan 1, 2022. At present, I measure #Russia‘s inflation at 78%/yr. pic.twitter.com/wKO4hylHwA

— Steve Hanke (@steve_hanke) March 2, 2022