PAYTECH FOCUS: UKRAINE Finding a way through: Can finance help broker a ceasefire where diplomacy has failed?
Payments The path to peace? Payments have been on the front line like never before. But could the West’s response to war in Ukraine strengthen its arsenal in repelling a wider assault on the integrity of the financial system? When the ‘European Wall’ between Russia and Ukraine was violently breached in early 2022, a shocked West groped for a non-armed response forceful enough to bring Moscow to its knees: finance became that counter-weapon. Governments took aim at Russia’s politically exposed super-rich with sanctions on a scale never before seen. Its central bank reserves, stashed abroad, were frozen. Ordinary people mobilised anonymous donations of cryptocurrency to support the Ukrainian resistance. But the financial warhead that could undoubtedly cause a broadside was one that disabled the cross-border payments system on which the country’s banks relied. ffnews.com
In March, the independent SWIFT payments messaging service, which facilitates the majority of transactions settled between the world’s banks, dealt what was, at that point, the biggest blow to the Kremlin. Initially, seven major Russian banks were shut out of the flow of international, multi-currency transactions or had their access to the SWIFT network severely limited after a tense debate between European states, mindful of the damage such a move inflicted on their own financial systems. As the shelling intensified, Russia’s ally Belarus saw its banks coming under the same heat. The consequences of the financial tourniquet applied to Russia were rapid and severe: 30 per cent wiped off the ruble’s value, to which the Central Bank responded by hiking interest rates to 20 per cent, making life for ordinary Russian citizens even more challenging. Given all transactions for major network cards (VISA, Mastercard and Amex included) operate through SWIFT, many point-ofsale and e-commerce payments were crippled. PayPal, too, turned off the tap.
It was perhaps appropriate that SWIFT’s communication superhighway, which has done so much to introduce transparency and trust into the payments process, should emerge as the secret weapon against a regime that appears to rely on false ‘truths’ and opacity. Payments, and how they are handled, in 2022, reflect many of the values now at stake: a democratised financial service characterised by openness, fairness and freedom of movement – the very antithesis of tyranny. In fact, freedom of communication, more broadly, made President Vladimir Putin’s well-practised flow of disinformation hard to sustain. It’s trickier to maintain an iron curtain of propaganda in a Gen Z world of Facebook (Meta), Twitter, WhatsApp, YouTube and Tik Tok. On the other hand, modern payment systems’ very interconnected-ness and enhanced speed make it hard to stop a flight of cash from any one country, or take action against it without sustaining self-inflected wounds. Issue 11 | ThePaytechMagazine
21
