In its triple strike of sanctions on Russia, the EU initially was not looking to collapse the Russian financial system. Far from it: Its first instinct was to find the means to continue purchasing its energy needs (made all there more vital by the state of the European gas reserves hovering close to zero). Purchases of energy, special metals, rare earths (all needed for high tech manufacture) and agricultural products were to be exempted. In short, at first brush, the sinews of the global financial system were intended to remain intact.

The main target rather, was to block the core to the Russian financial system’s ability to raise capital – supplemented by specific sanctions on Alrosa, a major player in the diamond market, and Sovcomflot, a tanker fleet operator.

Then, last Saturday morning (26 February) everything changed. It became a blitzkrieg: “We’re waging an all-out economic and financial war on Russia. We will cause the collapse of the Russian economy”, said the French Finance Minister, Le Maire (words, he later said, he regretted).

That Saturday, the EU, the U.S. and some allies acted to freeze the Russian Central Bank’s foreign exchange reserves held overseas. And certain Russian banks (in the end seven) were to be expelled from SWIFT financial messaging service. The intent was openly admitted in an U.S. unattributable briefing: It was to trigger a ‘bear raid’ (ie. an orchestrated mass selling) of the Rouble on the following Monday that would collapse the value of the currency.

The purpose to freezing the Central Bank’s reserves was two-fold: First, to prevent the Bank from supporting the Rouble. And secondly, to create a commercial bank liquidity scarcity inside Russia to feed into a concerted campaign over that weekend to scare Russians into believing that some domestic banks might fail – thus prompting a rush at the ATMs, and start a bank-run, in other words.

More than two decades ago, in August 1998, Russia defaulted on its debt and devalued the Rouble, sparking a political crisis that culminated with Vladimir Putin replacing Boris Yeltsin. In 2014, there was a similar U.S. attempt to crash the Rouble through sanctions and by engineering (with Saudi Arabian help) a 41% drop in oil prices by January 2015.

Plainly, last Saturday morning when Ursula von der Leyen announced that ‘selected’ Russian banks would be expelled from SWIFT and the international financial messaging system; and spelled out the near unprecedented Russian Central Bank reserve freeze, we were witnessing the repeat of 1998. The collapse of the economy (as Le Maire said), a run on the domestic banks and the prospect of soaring inflation. This combination was expected to conflate into a political crisis – albeit one intended, this time, to see Putin replaced, vice Yeltsin – aka regime change in Russia, as a senior U.S. think-tanker proposed this week.

In the end, the Rouble fell, but it did not collapse. The Russian currency rather, after an initial drop, recovered about half its early fall. Russians did queue at their ATMs on Monday, but a full run on the retail banks did not materialise. It was ‘managed’ by Moscow.

What occurred on that Saturday which prompted the EU switch from moderate sanctions to become a full participant in a financial war à outrance on Russia is not clear: It may have resulted from intense U.S. pressure, or it came from within, as Germany seized an opportune alibi to put itself back on the path of militarisation for the third time in the past several decades: To re-configure Germany as a major military power, a forceful participant in global politics.

And that – very simply – could not have been possible without tacit U.S. encouragement.

Ambassador Bhadrakumar notes that the underlying shifts made manifest by von der Leyen on Saturday “herald a profound shift in European politics. It is tempting, but ultimately futile, to contextually place this shift as a reaction to the Russian decision to launch military operations in Ukraine. The pretext only provides the alibi, whilst the shift is anchored on power play and has a dynamic of its own”. He continues,

“Without doubt, the three developments — Germany’s decision to step up its militarisation [spending an additional euro100 billion]; the EU decision to finance arms supplies to Ukraine, and Germany’s historic decision to reverse its policy not to supply weapons to conflict zones — mark a radical departure in European politics since World War II. The thinking toward a military build-up, the need for Germany to be a “forceful” participant in global politics and the jettisoning of its guilt complex and get “combat ready” — all these by far predate the current situation around Ukraine”.

The von der Leyen intervention may have been opportunism, driven by a resurgence of SPD German ambition (and perhaps by her own animus towards Russia, stemming from her family connection to the SS German capture of Kiev), yet its consequences are likely profound.

Just to be clear, on one Saturday, von der Leyen pulled the switch to turn off principal parts to Global financial functioning: blocking interbank messaging, confiscating foreign exchange reserves and the cutting the sinews of trade. Ostensibly this ‘burning’ of global structures is being done (like the burning of villages in Vietnam) to ‘save’ the liberal Order.

However, this must be taken in tandem with Germany’s and the EU decision to supply weapons (to not just any old ‘conflict zone’) but specifically to forces fighting Russian troops in Ukraine. The ‘Kick Ass’ parts to those Ukrainian forces ‘resisting’ Russia are neo-Nazi forces with a long history of committing atrocities against the Russian-speaking Ukrainian peoples. Germany will be joining with the U.S. in training these Nazi elements in Poland. The CIA has been doing such since 2015. (So, as Russia tries to de-Nazify Ukraine, Germany and the EU are encouraging European volunteers to join in a U.S.-led effort to use Nazi elements to resist Russia, just as in the way Jihadists were trained to resist Russia in Syria).

What a paradox! Effectively von der Leyen is overseeing the building of an EU ‘Berlin Wall’ – albeit with its purpose inverted now – to separate the EU from Russia. And to complete the parallel, she even announced that Russia Today and Sputnik broadcasts would be banned across the EU. Europeans can be allowed only to hear authorised EU messaging – (however, a week into the Russian invasion, cracks are appearing in this tightly-controlled western narrative – “Putin is NOT crazy and the Russian invasion is NOT failing”, warns a leading U.S. military analyst in the Daily Mail. Simply “[b]elieving Russia’s assault is going poorly may make us feel better but is at odds with the facts”, Roggio writes. “We cannot help Ukraine if we cannot be honest about its predicament”).

So Biden, finally, has his foreign policy ‘success’: Europe is walling itself off from Russia, China, and the emerging integrated Asian market. It has sanctioned itself from ‘dependency’ on Russian natural gas (without prospect of any immediate alternatives) and it has thrown itself in with the Biden project. Next up, the EU pivot to sanctioning China?

Will this last? It seems improbable. German industry has a long history for staging its own mercantile interests before wider geo-pollical ambitions – before, even, EU interests. And in Germany, the business class effectively is the political class and needs competitively-priced energy.

Whilst the rest of the world shows little or no enthusiasm to join with sanctions on Russia (China has ruled out sanctions on Russia), Europe is in hysteria. This will not fade quickly. The new ‘Iron Curtain’ erected in Brussels may last years.

But what of the unintended consequences to last Saturday’s ‘sanctions Blitzkrieg’: the ‘unknowable unknowns’ in Rumsfeld’s famous mantra? The unprecedented switch-off affecting a key part of the Globalist system did not download into a neutral, inert context – It developed into an emotionally hyper-charged atmosphere of Russophobia.

Whereas EU states had hoped to spare Russian energy shipments, they did not take account of the frenzy raised against Russia. The oil market has gone on strike, acting as if energy were already in the frame for Western sanctions: Oil tankers had already started to avoid Russian ports because of sanctions fears, and rates for oil tankers on Russian crude routes have exploded as much as nine-fold in the past few days. But now, amid growing fears of falling foul of complex restrictions in different jurisdictions, refiners and banks are balking at purchasing any Russian oil at all, traders and others involved in the market say. Market players fear too that measures that target oil exports directly could be imposed, should fighting in Ukraine intensify.

Commodity markets have been in turmoil since the Special Military Operation began. European natural gas jumped as much as 60% on Wednesday, as buyers, traders and shippers avoid Russian gas. A combination of sanctions and commercial decisions by shippers and insurers to steer clear has cut that contribution to global supplies sharply over the last week. A default cascade by western companies is perfectly possible. And Supply line disruption is inevitable.

Many will be affected by the commodity turmoil, but with Russia providing 25% of global wheat supplies, the 21% hike in wheat and 16% rise in corn prices since 1 January will represent a disaster for many states in the Middle East among others.

All this disruption to markets comes even before Moscow responds with its own countermeasures. They have been silent so far – but what if Moscow demands that future payments for energy are to be made in Yuan?

In sum, the changes set out by von der Leyen and the EU, with surging crude oil costs, could potentially tip global markets into crisis, and set off spiralling inflation. Cost inflation created by energy costs spiralling higher and food disruptions are not so easily susceptible to monetary remedies. If the daily drama of the war in Ukraine starts to fade from public view, and inflation persists, the political cost of von der Leyen’s Saturday drama is likely to be European-wide recession.

“Since well before the Russian invasion of Ukraine, Europeans have been struggling under the weight of runaway energy bills”, OilPrice.com notes. In Germany, for some, one month’s energy costs the same as they used to pay for a whole year; in the UK the government has raised the price cap for energy bills by a whopping 54%, and in Italy a recent 40% domestic energy cost hike could now nearly double.

The New York Times describes this impact on local businesses and industries as nothing short of “frightening”, as all kinds of small businesses across Europe (prior to last week’s events) have been forced to cease their operations as energy costs outweigh profits. Large industries have not been immune to sticker shock either. “Almost two-thirds of the 28,000 companies surveyed by the Association of German Chambers of Commerce and Industry this month rated energy prices as one of their biggest business risks … For those in the industrial sector, the figure was as high as 85 percent.”

One recalls that old prediction from the Middle East, that western values would turn against the West itself, and ultimately devour it.

Globalization would be impossible without SWIFT

The society was founded in 1973. By that time the post-war monetary system established in 1944 in Bretton Woods had virtually collapsed. The dollar as well as other currencies had been divorced from gold, and the printing presses at the US Federal Reserve and other Western central banks were furiously at work. The volume of international payments had increased sharply. The traditional systems for sharing data about payment transactions (the teletype, telegraph, and telephone) could not cope with the increased traffic.

It was necessary to draw upon the latest technology in order to centralize the isolated channels used to exchange information. Two hundred thirty-nine banks from 15 countries worked together to set up an organization devoted to solving this problem. SWIFT is a cooperative society, established under European law, with a head office in Brussels. Currently almost 11,000 institutions from over 200 countries, including 9,600 banks, are members of SWIFT. Every year 2.5 billion payment orders are transmitted through the SWIFT network, which processes billions of dollars each day.

SWIFT’s advantages are its speed, low cost, and reliable data protection. As a result, the majority of the world’s international settlements and payments now go through the SWIFT system. Payments are also cleared through this network even when each of the parties is under the same jurisdiction. This includes dollar and euro payments that must be handled by the banking systems of the US and European Union. During the 21st century the SWIFT system began helping money circulate throughout the entire global economy. The economic and financial globalization that began in the 1970s would have been impossible without SWIFT.

The scandal over the attack against the central bank of Bangladesh

The SWIFT system has often been targeted by hackers trying to break into databases and divert money from the accounts of the society’s member banks. Several attempts at security breaches have been documented in just the last few days.

In early March, the central bank of Bangladesh reported the disappearance of $81 million of its foreign-exchange reserves. This had gone unnoticed by the IT services at SWIFT and the central bank. 

An investigation revealed that the hardware and software used to process the central bank’s payment operations left much to be desired. The cyber intruders also turned out to have advanced technical skills. They did not expect the facts of the theft to come to light immediately and assumed that they would have time to either move their spoils somewhere safe or to launder the money.

The attack on the central bank of Bangladesh had been expertly planned and demonstrated a close familiarity with the inner workings of that bank. As a rule, having someone on the inside can either make or break a hacking operation conducted from outside of that organization. Thus the question arises: are there such informants inside the SWIFT headquarters in Brussels? 

SWIFT: high-profile scandals from recent years

The society has suffered scandals in the past. After Sept. 11, 2001, the CIA as well as the financial-intelligence arm of the US Treasury Department gained access to SWIFT network information. But the managers of the SWIFT data centers did not bring this cooperation between the society and the security agencies to their members’ attention. Only a select few knew about the American «terrorist tracking» program. The information was not leaked until 2006.

In 2012 SWIFT again found itself in the headlines. At that time Washington was heavily pressuring the society to disconnect Iranian banks from the SWIFT network. Of course, a society that constantly claims to «stay out of politics» was uncomfortable with this measure. Disconnecting even one bank would generate distrust of the system, lower its rating, and encourage other SWIFT members to formulate backup plans. But Washington won that battle – 14 Iranian banks were expelled from SWIFT. 

But every cloud has a silver lining. Iran learned to manage without SWIFT and won valuable experience in the use of alternative systems for international payments and settlements. Washington has now graciously revoked some of the sanctions against Iran, and so once again that country is permitted to use the SWIFT network. But Tehran is in no hurry to accept the invitation. First of all, Washington’s policy toward Iran is highly contradictory and inconsistent. Second, in light of the recent scandal, Iran and other countries have increasing misgivings about SWIFT. It is unlikely that Tehran will put all its eggs into one basket. A few Iranian banks will be reconnected, but most payment transactions will continue to be made through alternative channels.

Russia needs an alternative to SWIFT

There are about 800 banks in Russia today, approximately 600 of which are connected to the SWIFT system. Russia is home to the second-highest number of SWIFT member institutions (after the US), but it doesn’t even crack the top ten in terms of volume of transactions (last year Moscow was in 15^th place). By the early 2000s at least 90% of Russia’s foreign payments were processed through SWIFT. The system was also utilized for many domestic transactions.

When the West first introduced economic sanctions against Russia in 2014, British Prime Minister David Cameron demanded that Russia be disconnected from the SWIFT system. The only reason they have not made good on this threat is because the West is afraid of the potential consequences. After all, disconnecting Russia from SWIFT isn’t like disconnecting Iran – only 14 banks were cut off there, while 600 would need to be unplugged in the Russian Federation.

But if the hybrid war against Russia becomes a full-blown conflict, it will not be possible to rule out the chance that Russian bank operations will be completely barred from SWIFT. Preparations for that war can’t wait until the last minute, and some measures are already in place. For example, by late 2014 Russian companies and organizations were already making payments and settling accounts with one another without resorting to SWIFT as an intermediary. A national system had been set up to handle domestic payments between Russian banks.

International payments are more complicated. Back in 2014, talk began of creating a direct-payment system (that would also communicate information about payments) between China and the Russian Federation. The system needs to be autonomous – fully independent of any payment systems controlled by the United States and European Union (specifically the trans-European TARGET system). And this autonomy is only possible by transitioning to the use of national currencies – a premise that was built into the original design.

In addition to the agreement signed at the BRICS summit in Brazil in July 2014 to establish the BRICS Development Bank, it was also agreed that the central banks of the BRICS countries would open mutual lines of credit in one another’s national currencies. Perhaps that was when the idea of creating a bilateral payment system for Russia and China was transformed into the idea of a multilateral BRICS payment system. Naturally, that would also involve transactions in the national currencies of those five countries.

Russia has shown the most interest in this BRICS payment network. Last October Beijing reported that a system for processing international payments in yuan was already operational, which it called the Chinese alternative to SWIFT. Only a modest number of transactions are as yet using this Chinese platform, but it is possible that this acorn could grow into a mighty oak of a system, in time becoming an alternative to SWIFT.

Some non-BRICS countries, such as Iran and Kazakhstan, have shown an interest in taking part in the project to create an alternative network for multilateral payments. The latest SWIFT scandal (the theft of the money from the central bank of Bangladesh) is yet another reason why Russia and its international partners should pick up the pace and get this project to create an alternative international payment system up and running.

Natural resources were also essentially the reason for reducing Iran to a Western vassalage. That never had anything to do with Tehran developing a nuclear weapon, which was banned by both the leader of the Islamic revolution, Ayatollah Khomeini, and Supreme Leader Ayatollah Khamenei.

The ‘New Great Game’ in Eurasia was always about control of the Eurasian land mass. Minor setbacks to the American elite project do not mean the game will be restricted to a mere “war of attrition”. Rather the contrary.

All about PGS

In Ukraine, the Kremlin has been more than explicit there are two definitive red lines. Ukraine won’t join NATO. And Moscow won’t allow the popular republics of Donetsk and Lugansk to be crushed.

We are coming closer to a potentially explosive deadline – when EU sanctions expire in July. An EU in turmoil but still enslaved to NATO – see the pathetic “Dragoon Ride” convoy from the Baltics to Poland or the “Atlantic Resolve” NATO show-off exercise – may decide to expand them, and even try to exclude Russia from SWIFT.

Only fools believe Washington is going to risk American lives over Ukraine or even Poland. Yet let’s plan a few steps ahead. If it ever comes to the unthinkable – a war between NATO and Russia in Ukraine – Russian defense circles are sure of conventional and nuclear superiority on sea and land. And the Pentagon knows it. Russia would reduce NATO forces to smithereens in a matter of hours. And then would come Washington’s stark choice: accept ignominious defeat or escalate to tactical nuclear weapons.

The Pentagon knows that Russia has the air and missile defense capabilities to counter anything embedded in the US Prompt Global Strike (PGS). Simultaneously though, Moscow is saying it would rather not use these capabilities.

Major General Kirill Makarov, Russia’s Aerospace Defense Forces’ deputy chief, has been very clear about the PGS threat. Moscow’s December 2014 new military doctrine qualifies PGS as well as NATO’s current military buildup as the top two security threats to Russia.

Unlike non-stop Pentagon/NATO bragging/demonizing, what Russian defense circles don't need to advertise is how they are now a couple of generations ahead of the US in their advanced weaponry.

The bottom line is that while the Pentagon was mired in the Afghanistan and Iraq quagmires, they completely missed Russia’s technological jump ahead. The same applies to China’s ability to hit US satellites and thus pulverize American ICBM satellite guidance systems.

The current privileged scenario is Russia playing for time until it has totally sealed Russia’s air space to American ICBMs, stealth aircraft and cruise missiles – via the S-500 system.

This has not escaped the attention of the British Joint Intelligence Committee (JIC) – as it gamed sometime ago whether Washington might launch a first strike against Russia.

According to the JIC, Washington might go rogue if "a) an extreme government were to take over in the United States, b) and there was increased lack of confidence by the United States in some if not all of her Western allies owing to political developments in their countries, c) and there was some sudden advance in the USA in the sphere of weapons, etc. that the counsels of impatience may get the upper hand."

US ‘Think Tankland’ spinning that Russian military planners should take advantage of their superiority to launch a first strike nuclear attack against the US is bogus; the Russian doctrine is eminently defensive.

Yet that does not exclude Washington doing the unthinkable the next time the Pentagon thinks of itself to be in the position Russia is now in.

SWIFT changes

The whole game used to be about who ruled the waves – the geopolitical gift the US inherited from Great Britain. Control of the seas meant the US inheriting five empires; Japan, Germany, Great Britain, France, the Netherlands. All those massive US carrier task forces patrolling the oceans to guarantee “free trade” – as the hegemonic propaganda machine goes – could be turned against China in a flash. It’s a mechanism similar to the carefully choreographed “leading from behind” financial op to simultaneously crash the ruble/launch an oil war and thus smash Russia into submission.

Washington’s master plan remains deceptively simple; to “neutralize” China by Japan, and Russia by Germany, with the US backing its two anchors, Germany and Japan. Russia is the de facto only BRICS nation blocking the master plan.

This was the case until Beijing launched the New Silk Road(s), which essentially mean the linking of all Eurasia into a “win-win” trade/commerce bonanza on high-speed rail, and in the process diverting freight tonnage overland and away from the seas.

So NATO’s non-stop Russia demonizing is in fact quaint. Think about NATO picking a fight against the constantly evolving, complex Russia-China strategic partnership. And in a not so remote future, as I indicated here, Germany, Russia and China have what it takes to be the essential pillars of a fully integrated Eurasia.

As it stands, the key shadow play is Moscow and Beijing silently preparing their own SWIFT system while Russia prepares to seal its air space with S-500s. Western Ukraine is doomed; leave it to the austerity-ravaged EU – which, by the way, doesn’t want it. And all this while the same EU tries to handicap the US commercially with a rigged euro that still doesn’t allow it to penetrate more US markets.

As for an irrelevant NATO, all it can do is cry, cry, cry.

An analysis of economic wars from the 19^th to the 21^st centuries shows that, in an overwhelming number of cases, they primarily pursued and are pursuing political objectives. They differ in this from trade wars, the objective of which is to seize markets. The wars are referred to as economic wars because they put pressure on other states through economic means: trade, maritime, and credit blockades, as well as the seizure and confiscation of property.

While carrying out its aggressive foreign policy towards countries on the periphery of global capitalism, the West prefers to avoid using the term ‘economic warfare’. America’s ruling elite and its allies use neutral words like ‘economic sanctions’, ‘trade and economic restrictions’, ‘moratorium’, ‘embargoes’ and so on. As a rule, however, these restrictions, moratoriums and embargoes in combination can have a powerful effect designed to undermine an enemy’s economy, provoke social unrest, force a regime change and change political policies. The combination of economic sanctions introduced by the West against Russia in 2014 could undoubtedly be characterised as a full-scale economic war. 

Among the economic wars of the past, one could call to mind the so-called ‘Continental Blockade’. This set of measures to block Great Britain’s export and import trade was carried out by Napoleon I of France between 1806 and 1814. The French Emperor, however, used the ‘continental blockade’ to not only pursue political objectives but also economic ones – to drive English manufacturers and merchants out of the markets of Continental Europe and fill them with French goods. Napoleon also managed to involve most of the countries of Continental Europe in his blockade of the British Isles, which is how it came to be known as the ‘Continental Blockade’. On the whole, the most common type of economic warfare in the 19th century was the maritime blockade. Between 1827 and 1914, 21 maritime blockades were documented against the following countries: Turkey, Portugal, the Netherlands, Colombia, Panama, Mexico, Argentina, and El Salvador. The blockades were initiated by the following countries: Great Britain (12 times), France (11 times), Italy and Germany (3 times each), Austria and Russia (2 times each), and Chile (Banking Encyclopaedia (2013) // «A history of economic sanctions»).

Economic wars and economic sanctions in the 20^_th century

Below (Table 1) is data on the dynamics of documented cases of economic sanctions in the 20th century. 

Table 1.

The dynamics of economic sanctions in the 20^th century.

Years (five-year intervals) Number of cases of sanctions

1911-1915                    1

1916-1920                     2

1921-1925                    2

1926-1930                    0

1931-1935                    3

1936-1940                    3

1941-1945                    1

1946-1950                    8

1951-1955                    5

1956-1960                   10

1961-1965                   15

1966-1970                    4

1971-1975                   13

1976-1980                   25

1981-1985                   15

1986-1990                   20

1991-1995                   34

1996-2000                   13

Source: Gary Clyde Hufbauer, Jeffrey J. Schott, Kimberly Ann Elliott, and Barbara Oegg. Economic Sanctions Reconsidered, 3rd edition. November 2007.

As can be seen, economic sanctions were an important and often used tool of international policy only after World War II, and especially in the last three decades of the 20th century. Between 1971 and 2000, there were 120 cases of sanctions, amounting to 69 per cent of all cases documented between 1911 and 2000. 

The most ambitious economic war of the 20th century was the West’s economic war against the USSR. This war had clear-cut political objectives – removing the Bolshevik government, bringing to power stooges of the countries of the Entente (primarily Great Britain and France), and changing the country’s social and economic policies. Its objectives were also to get Russia to fulfil her pre-war and war debt obligations, and restore the property rights of foreigners (or, put simply, to reverse the nationalisation of foreign assets). The economic war against Soviet Russia began in December 1917, when Russia’s former Entente allies declared a trade and maritime blockade on her. With a few brief intervals (first and foremost during World War II), the economic war against the Soviet state continued right up until the collapse of the USSR in December 1991. The West also carried out an economic war against other socialist countries. It was an integral part of the ‘cold war’ against the socialist camp (alongside information and psychological warfare and intelligence operations). 

Economic sanctions and the economic war against Russia

The assertion that the West did not carry out an economic war against the Russian Federation following its formation is debatable. Thus with regard to Russia, the Jackson-Vanik Amendment to the Trade Act, passed by Congress in 1974, remains in force in the United States. It was introduced 40-odd years ago with the aim of forcing Moscow to lift restrictions on the emigration of Jews from Russia. The amendment provided for various restrictions related to both import and export trade with the Soviet Union and was only repealed in 2012. It was immediately replaced by a new act, however, known as the ‘Magnitsky Act’. This act retained the right of the US government and the US president to introduce trade restrictions with the Russian Federation. 

Another example is the restrictions on the supply of technology. Back in 1949, an international organisation of Western countries called the Coordinating Committee for Multilateral Export Controls, more commonly known as CoCom, was set up at the instigation of Washington. During the time of the ‘cold war’, CoCom put together a list of «strategic» goods and technologies not to be exported to Eastern Bloc countries. The committee developed a strategy for the «controlled technological inferiority» of countries in the Warsaw Pact military alliance. The Berlin Wall fell, the Soviet Union fell, yet this organisation continued to exist. CoCom was finally dismantled in 1994, only for the so-called Wassenaar Arrangement to appear in its place. This arrangement allowed for the supply of military and dual-purpose technologies from countries in the West to ‘undesirable’ countries to be restricted just as effectively. In short, the only thing that changed was the legislative acts and the organisation’s door plaque, but the essence of the West’s policy towards Russia remained the same as it had been towards the Soviet Union. The Russian Federation was still in the crosshairs of an economic war. 

There are two reasons why the particular external manifestations of this war against Russia were not perceived until recently. 

Firstly, during the first stage of its existence, the Russian Federation voluntarily followed the policies of the West and instead of being the ‘subject’ of international policy, the country became part of this policy and there was no need for enforcement actions to be taken against her. The West had a vast arsenal of economic warfare methods, but used them extremely rarely in the 1990s. 

Secondly, because certain measures by the West do not officially have anything to do with economic warfare. But only officially. In the summer of 2014, for example, the International Court in the Hague delivered its verdict on the lawsuit filed by the ‘aggrieved’ foreign investors of Russian oil company Yukos. It ordered the Russian Federation to pay the claimants USD 50 million in compensation. The court’s decision has a clear political motivation. The investors’ lawsuit was in court for many years, but it was in 2014 that the case went ‘bang’. The verdict was delivered at the height of the Ukrainian crisis, when the West had already introduced a number of sanctions against Russia, and the court’s decision was designed to intensify the effect of the official sanctions imposed by the US and EU countries. 

Half the world is under sanctions

Russia is not the only target of the West’s economic warfare. According to UN data, at the beginning of the 21^st century, economic sanctions by the US and other countries of the ‘golden billion’ were imposed on dozens of countries inhabited by 52 per cent of the world’s population. The severity of these sanctions, as well as their range and duration, vary greatly, of course. Washington’s economic war against Cuba and North Korea is generally thought to be the longest. Sanctions against Cuba were introduced in 1960, when insurgents under the leadership of Fidel Castro expropriated the property of US citizens and companies on the island. In 1962, the sanctions were stepped up to the level of an embargo and have remained in force ever since almost without any kind of easing. According to the Cuban government, direct losses as a result of the embargo which has lasted for more than half a century amount to nearly USD 1 trillion. However, Washington has never achieved its main aim of changing the country’s political power. 

Iran is also being subjected to a protracted economic war. Washington first imposed sanctions on this country in 1979. They have not been lifted since then, and only the range of the sanctions has changed. Even after the launch of multilateral talks with Iran on the issue of its nuclear programme (which has supposedly been the reason for the sanctions since 1990), the blockade against Iran has not been lifted completely. It is even possible to say that the easing of sanctions was largely symbolic. The war against Iran continues. 

The arsenal of economic warfare methods in the 21^st century

At the beginning of the 21^st century, the arsenal for waging an economic war has become quite extensive and is incomparable with the maritime blockades of the 19th century. 

Firstly, the economic sanctions are formally declared by government departments and organisations. The sanctions may apply to all citizens and economic entities of another country (companies, banks and other organisations). They can also be sectoral, like the anti-Russian sanctions declared in the summer of 2014 against three sectors: military production, oil production, and the banking sector. In a number of cases, sanctions can also be ‘targeted’, (in which case special ‘blacklists’ are compiled). Sanctions can be ‘primary’ or ‘secondary’. Primary sanctions refer to measures against the citizens and economic entities of the country being subjected to sanctions, while secondary sanctions refer to measures against the citizens, companies and banks of other countries assisting in the violation of sanctions. For example, courts and financial supervisory authorities have accused a number of banks in Western Europe and the US of being involved in carrying out international payments and settlements for banks and companies in countries like Iran, Libya, Syria, Cuba and Sudan (against which the US and several other European countries have declared sanctions). In addition, the banks being subjected to these ‘secondary’ sanctions are today incurring fines amounting to billions of dollars. 

Sanctions can apply to commodity flows (export and import), transport services, the movement of labour, and cash flows. A sanction like blocking banking transactions via the SWIFT communication system can have a particularly devastating effect. Although SWIFT is a private international organisation (founded for the most part by the banks of various countries), US government agencies and those of its allies in Europe can still put a great deal of pressure on it. In 2012, under intense external pressure, SWIFT (which is officially located in the jurisdiction of Belgium) was forced to block the transactions of Iranian banks. 

A sanction like freezing the foreign exchange reserves of a pariah country can also have an extremely devastating effect, and there are already precedents for this. In the past, for example, the US seized Iran’s reserves, although the exact amount was not disclosed. In 2011, the reserves of Libya’s central bank were seized along with the country’s sovereign wealth fund. The total amount of the assets seized, according to the media, was USD 150 billion. 

And if the wheels of economic warfare were to turn vigorously enough, then it is not impossible that the foreign assets of private companies and banks could also be seized, confiscated and nationalised. What’s more, measures like these could be resorted to both by the countries in the West who initiate these economic wars and countries on the periphery of global capitalism who will be forced to protect themselves from such wars. During the rise of the national liberation movement in Asia, Africa and Latin America in the 1960s, a large number of cases were documented involving the nationalisation of assets belonging to transnational corporations operating in these countries. However, it would obviously be difficult to class the seizure, confiscation and nationalisation of assets by either side as conventional economic sanctions. 

Secondly, economic warfare methods should also refer to measures that are not officially associated with the political motives being used to impose sanctions. A clear example of a measure like this which is ‘independent’ of sanctions is the manipulation of commodity and financial markets. Relying on the resources of its banks, countries that initiate an economic war (primarily the US and Great Britain) can artificially raise and lower prices on the commodity markets, interest rates on the financial markets, exchange rates on the currency markets and so on. Moreover, it can all be blamed on ‘blind market forces’ or, if worst comes to worst, ‘greedy speculators’. The current drop in oil prices is hitting the Russian economy hard, but it is difficult to officially link this drop in prices to the war that is being unleashed against Russia. Rating agencies are unashamedly lowering the price of Russian securities to the level of garbage. And at the same time, the agencies are giving the impression that their valuations are ‘independent’ and have nothing to do with the current sanctions. 

The US FATCA Law (the Foreign Account Tax Compliance Act) could become a powerful unofficial tool of the economic war against Russia. Officially, the law is designed to ensure the full collection of taxes for the US Treasury. But to accomplish this, the US Internal Revenue Service is this year planning to demand that all banks located outside of America provide information on those clients who have tax obligations to the US Treasury. In practice, however, under the guise of efforts to improve its tax collection, the US government is making an unprecedented attempt to place foreign banks under its direct administrative control. Russian banks are no exception. In fact, since the US is carrying out an undeclared economic war against Russia, then such control over Russian banks will most probably be used to destabilise Russia economically. 

Today, it is of practical importance that our country studies the history of economic warfare in the world. In doing so, two issues are worthy of particular interest: the effectiveness of sanctions and measures to counteract sanctions. But more about that in the next article. 

(To be continued)

The contemporary world of finances is about information mainly, the data on banks’ clients, insurance companies, pension and investment, as well as other entities dealing in financial business, is to be collected, stored, processed and used. The miscellaneous bits and pieces are brought together from different sources. In case of individuals it all boils down to money, property, work, health, relatives and the living conditions. In case of legal entities the sphere of interest encompasses funds and business dealings, credit history, planned investments, top leaders, shareholders and managers, contracts, companies’ capital funds, etc. These are the things banks and other financial dealers have their own services for. Aside from that, the information structures include credit bureaus, rating and special information agencies. Some banks or firms may create information pools storing the information on clients. Central banks have become powerful information agencies which carry out the functions of banking oversight taking advantage of practically unlimited access to commercial banks data. Moreover, some central banks gather information on their own. For example, the Bank of France monitors manufacturing enterprises under the pretext of the need to perfect its credit policy. Mighty financial and commercial information flows go through payment terminals, which are telecommunications data providing systems. Separate, but closely intertwined and interacted, information systems survey vast amounts of information flows. 

The bulk of banks and financial companies operate their own security services. Formally their mission is to protect the information, which is the property of enterprises. Unofficially many services get additional information about clients and rivals. Naturally it presupposes that they conduct covert activities using special technical equipment and human intelligence (HUMINT). 

The information collected is confidential and requires legal procedures to get access to it. The fact that they acquire confidential information and enjoy significant independence from state brings the banks closer to secret services. Actually the global information surveillance dome is operated by banks and special services together. In fact, the organic merger of Western special services and financial and banking sector has taken place resulting in a giant shady Leviathan with vast financial and information resources to control all aspects of human life. 

SWIFT as global financial and information surveillance «dome» 

I’m sure the abbreviation SWIFT (Society for Worldwide Interbank Financial Telecommunication) is something new for many. It is a member-owned cooperative through which the financial world conducts its business operations. More than 10,000 financial institutions and corporations in 212 countries trust it every day to exchange millions of standardized financial messages. This activity involves the secure exchange of proprietary data while formally ensuring its confidentiality and integrity. From legal point of view it is a joint-stock company made up by banks of different countries. It was founded in 1973 by 240 banks of 15 states to send and receive information about financial transactions in a secure, standardized and reliable environment. The Society has been functioning since 1977. The US dollar is used for the brunt of SWIFT transactions. SWIFT is a cooperative society under Belgian law and it is owned by its member financial institutions. It has offices around the world. SWIFT headquarters, designed by Ricardo Bofill Taller de Arquitectura are in La Hulpe, Belgium, near Brussels. The top governing body is the General Assembly. The decision is taken on the basis of «one share-one vote» majority. The West European and US banks dominate the directors’ board. The United States of America, Germany, Switzerland, France and Great Britain are the leading shareholders and decision makers. The shares are distributed according to the volume of traffic transported. 

Any bank which enjoys the right to conduct international banking operations in compliance with national law can join SWIFT. Since as far back as the end of XX century SWIFT has been unavoidable in case someone wanted to send money to another country. Once the lion’s share of international transactions was done in dollars, all payments went through the accounts opened in US banks, which, in their turn, had Federal Reserve System (FRS) accounts. Thus, being an international body, SWIFT is tied to the FRS, even though the US banks have no controlling stock. The SWIFT servers are situated in the United States and Belgium. By the middle of last decade the Society served 7800 clients in 200 countries. The daily financial flow is 6 trillion. 

SWIFT as FRS and CIA joint venture

In the summer of 2006 SWIFT happened to be in the heat of a juicy scandal caused by the New York Times, the Wall Street Journal and the Los Angeles Times publications. 

That's how the story went. The events of 9/11 gave rise to the idea of putting under control all financial transactions inside the country, especially the transnational ones. Formally the purpose was to prevent funding terrorist organizations. Pretty soon the CIA established contacts with SWIFT to survey payments information coming in and out. The Agency had no legal ground to do so. Even its former employees were not aware of these activities. There was an attempt to somehow justify the operations, so in 2003 the Society for Worldwide Interbank Financial Telecommunication and some US state agencies, the FBI and the CIA included, as well as the FRS (the Federal Reserve System Chairman Alan Greenspan was there), held talks on the issue in Washington. 

The parties agreed to continue the cooperation under the condition Washington would observe some rules. It envisaged that the US would strengthen the control on the part of US Department of Treasury and limit the activities by exclusively financial transactions suspected to have relation to terror funding. The United States promised to keep away from other payments, including those related to tax evasion and drug trafficking. 

At the talks the US put forward an argument that formally SWIFT was not a bank but rather an interbank liaison link. So the access to its data was not in violation of US bank secrecy laws. It is affirmed that the central banks of Great Britain, France, Germany, Italy, Belgium, the Netherlands, Sweden, Switzerland and Japan were informed about the CIA practices. The Central Bank of Russia was not included into the mentioned awareness list… 

In some cases the information of SWIFT and its cooperation with the USA was classified and never left central banks keeping it away from public, government and parliament knowledge (even if aware, they would never let it out). That’s how it was in Great Britain. In the summer of 2006 the Guardian made come into the open a story telling that SWIFT yearly shared the information related to millions of British banks transactions with the CIA. According to the Guardian, the sharing of classified data is a violation of UK and European law (in particular, the European convention on human rights). 

A spokesman for the information commissioner told the Guardian that the privacy issue was being taken «extremely seriously». If the CIA had accessed financial data belonging to European individuals then this was «likely to be a breach of EU data protection legislation», he said, adding that UK data protection laws may also have been breached if British banking transactions had been handed over. The commissioner requested more information from Swift and the Belgium authorities before deciding how to proceed.

The Bank of England, one of the 10 central banks with a place on SWIFT's managing committee, revealed it had told the British government about the programme in 2002. «When we found out we informed the Treasury and passed the relationship over to them,» Peter Rogers of the Bank said. «We also told Swift that they had to speak to the government themselves. It had nothing to do with us. It was a matter of security and not of finance. It was an issue between Swift and the government».

In a written parliamentary answer, Gordon Brown confirmed the government was aware of the arrangement. Citing government policy not to comment on «specific security issues», however, the chancellor refused to say whether measures had been taken to «ensure the privacy of UK citizens who may have had their financial transactions viewed as part of US counter-terrorism investigations in conjunction with SWIFT». He also refused to say whether the Swift programme was «legally reconciled» with Article 8 of the European convention on human rights.

Financial – information «dome» today

Actually we know nothing about the cooperation between SWIFT and US special services. The issue appears to be kept out of media knowledge. I surmise, the odds are high it is still going on. At least, the United States has all it needs to do it (one of two servers is located on US soil). There are many indirect signs that SWIFT, a formally not-state entity, is under strong pressure from Washington. On of recent examples is the expulsion of Iran in 2012. It’s a common agreement the decision was taken under the US pressure. 

Finally, using SWIFT is not the only way to exercise control over international financial flows. The US dollar is the leading international currency. It means all the transactions go through US based accounts, even if legal entities and individuals are situated outside the country. The data is accumulated by commercial banks and the US Federal Reserve System. 

The creation of enormous detailed consolidated information base of the US Treasury Department is nearing the final phase. It will use the information from US banks, insurance companies, pension funds and other financial organizations. By the beginning of 2003 media reported that all the US special services, including the Central Intelligence Agency, the Federal Bureau of Investigation, the National Security Agency and others would get access to this data base to protect security and national interests. 

The accelerated pace of creating the information database to serve the US banksters and special services make other countries look for protection from the obtrusive control exercised by the Big Brother… A lot is said nowadays about the expediency of switching the international transactions from US dollar to other currencies. Normally it is viewed as the way to get away from the financial and economic dependence on the United States. This is a right thing to do because this change will also create an alternative to relying on the information controlled by USA.