Central banks as weapons: how the West learned from the eurozone crisis

Customers queue outside a Sberbank branch in Prague, February 2022. Source: BBC.

Back, after an extended pause over Christmas and New Year. Scenes from Moscow and other Russian cities over the last 24 hours suggests the initial stages of a bank run, whilst the rouble fell almost 40% in early trading as East Asian markets have opened. This was the intended result of the economic sanctions announced by European powers, Canada and the US, subsequently joined by Japan, over the weekend. The sanctions are measures of an unusually severe degree, threatening potential economic devastation, but the major mechanism they use has been road-tested over the last decade of economic crisis and disorder.

What follows is a reduced version of what ended up being a significantly longer essay on the post-neoliberal, post-globalised world. As with the US/UK invasion of Iraq, there is no credible justification made for what Putin is inflicting on Ukraine and its people, and the case offered by the Putin regime is also one transparently based on lies. But the invasion and its consequences dramatically expose the shape of the world system after more than a decade of war, disorder, and pandemic since the 2008 financial crisis. Events are, obviously, unfolding extremely rapidly, however, and I wanted to put something quicker down here.

Not oligarchs, not SWIFT

First, talk of financial sanctions has previously tended to focus on the flows of Putin regime-connected and often criminal financing that make their way through Western banking systems – notably including London. Restrictions on the ability of this or that oligarch to transact as they wish, whilst important, are closer to a severe nuisance rather than applying critical pressure. Likewise the ban on “golden passports” for oligarchs: long overdue, but hardly a knockout blow.

Second, the critical part of the package is not the removal of three major Russian banks from the SWIFT interbank messaging system. There has been a significant amount of confusion over this, and of course to the extent that SWIFT is mistaken for a payments system or something fundamental to the operations of a bank, noisily announcing a sanctioned removal of Russia from the system could undermine public confidence in its banks.

But SWIFT is not a payments system, and is not required for conventional domestic transactions; it facilitates the more rapid request of money transfers between international banks, and therefore facilitates