Harsh Western financial sanctions against the Russian Federation for its invasion of Ukraine have raised concerns of countries moving away from the U.S. dollar to avoid their brunt.
The United States, European Commission, France, Germany, Italy, the United Kingdom, and Canada announced Saturday that they would boot “selected” banks in Russia from the Society for Worldwide Interbank Financial Telecommunication network, known as SWIFT.
The countries also said they will impose “restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of our sanctions.”
Non-European Union countries Norway, Great Britain, Canada and Iceland also joined the blockade, bringing a near-total ban on Russian air travel west.
Following the sanctions, Russians rushed to their ATMs to withdraw cash anticipating a possibility they won’t be able to do that anymore. Citizens were lining up behind ATMs in long files waiting their turn to take out their savings, the Financial Times reported.
Amid the anxiety, the Russian Central Bank urged residents in the country to be calm, saying that “stable, has sufficient capital reserves and liquidity to function without outages in any situation. All client funds are secure and available at any time,” according to a statement shared with the Financial Times.
“I withdrew money at the beginning of all this, and I am going to go search for an ATM again now. Because I want to have a month worth of cash in case there are technical glitches with cards. I already had problems paying for a taxi with Google pay yesterday,” a female resident of Moscow told the outlet.
“I believe my bank is not under sanctions, and I doubt my money will disappear altogether, but there is a risk I won’t be able to buy food,” she said. “We simply do not know what to expect of the government. I can’t forecast, so I want cash to be around.”
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The panicked bank withdrawals amid the news of sanctions and closing of airspace have given bankers cause to worry.
“Their cash withdrawals are harming Russia, the banks’ liquidity is falling,” an executive of a Western bank in Russia told the Financial Times.
“I cannot even imagine the ruble tomorrow when trading opens up,” the banker said, according to Financial Times. “The central bank will try to support [the ruble], the question is, how long. Non-residents are selling Russian assets, getting rid of the ruble and it is very bad for us.”
The sanctions and their effect have led to speculations that Russia could turn to China to help blunt the effects of the sanctions.
China has long been critical of Western sanctions on Russia.
“We believe that sanctions are never the fundamental and effective way to solve problems. China always opposes any illegal unilateral sanctions,” Chinese government spokeswoman Hua Chunying said Wednesday when asked if China would join Western powers in sanctioning Russia, according to CNN.
According to the Financial Times, China has already signed some energy deals with Russia in the Chinese yuan.
In September last year, Russian gas giant Gazprom announced it would carry out settlements for refuelling aircraft with the Chinese yuan, Reuters reported.
Axios reported that the country is a major receiver of loans from China.
China isn’t the only country that Russia can turn to for blunting the effect of Western sanctions. India too has been considering means of reducing the impact of Western sanctions against Russia, Reuters reported.
According to the news service, which cited sources in the Indian government banking system, India was concerned that sanctions against Russia would jeopardize the nations’ supply of fertilizer from Russia.
One such means under consideration was a rupee based payments system where Russian banks and corporations can set up accounts in state-run banks in India and use them for trade settlement, the source told Reuters.