From the Financial Post...
Good morning! Over the last few days, we’ve been getting a crash course in
the plumbing of the global financial system. That’s because the West has been looking for the equivalent of the shut-off valve to disconnect Russia, down to the last spigot.
The scale and speed of the
economic sanctions that have been unleashed over the invasion of Ukraine have been unprecedented. The West has gone from worrying that cutting Russia off from SWIFT, the lifeblood of global banking, might be going too far, to gleefully pulling the plug — all in a matter of days. U.S. Treasury Secretary Janet Yellen estimated on Wednesday that 80 per cent of the Russian banking system was now isolated from the world, and that half of the central bank’s assets are immobilized. The ruble has lost a quarter of its value and Russia’s stock market is faring no better.
But that’s only part of it.
Asset managers are purging their Russian holdings and businesses are
halting operations there.
Oligarchs who had used the west as a playground are being forced to abandon their companies — and it looks like their yachts and real estate will be next.
Unwilling to intervene directly in the conflict over fears that it could escalate into a nuclear confrontation, the West is making up for it by waging financial war with something of the zeal of cancel culture.
There are risks in cutting off Russia entirely. Billions in U.S.-denominated debt could be subject to default, putting Western financial institutions at risk. Soaring energy prices could lead to other forms of economic blowback, even recession. Russia could also be pushed further into China’s orbit — though aren’t they already pretty tight?
Maybe worst of all, Vladimir Putin, who had planned for sanctions before the invasion of Crimea in 2014 and no doubt saw more coming this time around could survive, a more dangerous and isolated Tsar.
But the risk of allowing him to get away with what he’s doing in Ukraine is even greater. Being part of the global economy, with the efficiencies and wealth it can bestow, is a privilege, not a right. Putin’s Russia has forfeited that privilege — and will have a hard time regaining it.
— Joe Hood, Managing Editor, Financial Post
