Russia Tries to Draw China into Its Plan to Create an Alternative to SWIFT

A week after the British Prime Minister David Cameron suggested cutting Russia off the international payment system the Russians announce

russia flagAccording to the Russian news agency, ITAR-TASS, Russia and China are discussing setting up a system of interbank transactions which will become an analogue to International banking transaction system SWIFT. The Russian First Deputy Prime Minister, Igor Shuvalov, reportedly confirmed this issue on Wednesday after negotiations in Beijing. He said: “Yes, we have discussed and we have approved this idea.”

Russian authorities have sought to decrease the country’s financial market’s dependence on SWIFT (Society for Worldwide Interbank Financial Telecommunications) since the introduction of the first US sanctions, when international payment systems Visa and MasterCard denied services to some Russian banks owned by blacklisted individuals.

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Late last month, the Russian Central Bank and the government’s financial and economic departments announced that a bill has been drafted to create a Russian alternative of the SWIFT international financial message system.

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The need for such a sanctions bypassing move became clear very fast when earlier this month, UK’s Prime Minister, David Cameron, promoted a proposal at a EU summit to block Russian banking access to the system.

Faced with Western sanctions over the crisis in Ukraine, the Russian government has been making every effort to deepen its economic connection with China in the hope of countering the balance of power. Another example from earlier in August, is that the Russian and Chinese have agreed on having more direct yuan/ruble currency swaps.

According to Mr. Shuvalov’s statement from yesterday, Russia has also been discussing the establishment of an independent ratings agency with China. Concrete proposals will be made by the end of 2014, he said. With regards to China’s payment system, UnionPay, according to Shuvalov, cooperation with the yet-to-be-established Russian national payment system, UnionPay, is ready for a full-scale collaboration and will provide all necessary infrastructural capacities.

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