RE: SWIFT SANCTIONS - is it a NUCLEAR WEAPON in financial markets?
So let me address this by the numbers:
- The Russian economy is 1.75% of the world's GDP, a little less than Italy.
- Oil and gas composes 40.5% of the total Russian export market and 51.3% government revenue.
- The Russian economy is heavily dependent on petrol revenue, and has a low diversification index.
- About 40% of the EU’s Natural Gas and 25% of its crude oil is from Russia.
- About 50% of Russian exported oil and gas goes to the EU.
- Germany and France are the largest economies in the EU and NATO. 49% of German natural gas and 24% of France natural gas, is from Russia.
Most likely, the war in Ukraine will not impact global GDP that much, nor global supply chains, due to the size of the Russian economy, and it's diversification. And since Ukraine is much smaller than Russia economically, I didn't even mention it.
The SWIFT sanctions will more than likely be limited to trade outside of the EU/Russia oil and gas arrangement, because of the dependence of the EU on Russian oil and gas. And since a large portion of the Russian economy is oil and natural gas, and the largest trading partners beyond Europe, for Russia, is China, and other Asian states, they have already established a bilateral economic trading regime, largely independent of SWIFT.
Plus, this war in my opinion (after a lot more history lessons), is not going to last too much longer, maybe a little bit longer than the Russo-Georgian War in 2008. Ukraine and Russia will enter into a peace arrangement sooner rather than later. Russia is more than likely to hold territory in eastern Ukraine, and the periphery around Crimea, maybe give back land taken in the north as a negotiating piece as a sign of good will. Europe and the US will drop some of these sanctions because they'll be happy the shooting stopped.
Unfortunately, this is bad for Ukraine and it’s economy. But that is another subject.
As always, one of the best and most valuable comments is coming from you @fijimermaid :)
Seriously? I didn't know that Italian economy is bigger ... shocking.
thanks buddy
I know, it seems crazy, because we see Russia is the largest country in land mass, but its economy is smaller than a country that is 1/60th its size.
That's right, Russia is 60 times larger than Italy, with a smaller economy. And the Russian population is more than twice Italy's population.
So, what you are saying is that the West will keep the oil flowing and because Russia is so dependent on the oil, it will not counter-sanction the West by not delivering any oil to them. Like your view.
That is a good way to look at it. Russia and Europe are joined at the hip with oil and gas. There is no viable alternative for both parties. The Russians need the money from Europe, and Europe needs the nat gas. Europe doesn't have a viable alternative, contrary to what the Americans say.
But necessity is the mother of invention, so Russia needs to wrap up their campaign in Ukraine quickly, so it doesn't push the Europeans and the Americans to develop the technology to offer a viable alternative to Russian oil and natural gas.