Taiwan and South Korea were the latest additions on Monday and Tuesday to the Swift ban against Russia that was spearheaded by Western powers and their allies upon the country’s invasion of Ukraine. In addition to blocking key Russian banks from the international payment system, both will also participate in strategic sanctions on semiconductor exports to Russia, Reuters reports.
EU member states, the UK, the U.S., Japan and Canada already moved to ban Russian banks from Swift last week in order to limit the country’s ability to export goods and earn money to finance its war effort in Ukraine. But the move also means that Russian debtors will be unable to settle their bills at foreign banks if these are located in a country that has put Russian financial providers on the blacklist.
This chart shows the biggest outstanding amounts on residents of Russia, by country of foreign bank … [+] (in billion U.S. dollars).
As seen in data by the Bank for International Settlements, the move by Taiwan can be seen as largely symbolic as exposure to claims on Russia is minimal at around $184 million. The amount of money Russian entities owe but could have trouble paying back is higher in South Korea at $1.7 billion and Japan at $9.6 billion. This puts the latter country in rank five of the most exposed to Russian debt among the 25 countries the BIS collects data on.
Exposure to unpaid Russian debt was highest in Italy and France, where upwards of $25 billion is owed each. In Austria and the U.S., exposure stood at $17.5 billion and $14.7 billion, respectively. One reason Austria ranks high is because one of the country’s largest banks, Raiffeisen, has a very active Russian subsidiary, which is one of the most lucrative parts of the company. The country also has deep business ties with Russia on energy, Der Standard reports. Austria, along with Germany, Italy and Hungary, was reportedly among those who opposed the Swift ban at first.
Will the market need help?
It is still unclear how big the consequences of unpaid dues from Russia will be. Not all debts listed by the BIS were scheduled to be paid back in the immediate future. Still, Credit Suisse strategist Zoltan Pozsar compared the scenario to the failure of Lehman brothers in 2008 as well as the pandemic crunch of March 2020, when liquidity problems in the U.S. market caused by a non-paying bank or non-paying banks had to be remedied by the Fed.
As another consequence, EU and G7 countries will also not be able to send money to banned Russian banks to pay for goods or services. While there has been a lot of talk about whether this means that Europe won’t be able to pay for natural gas it receives from Russia, Gazprombank—which handles a lot of these payments as the financial arm of Russia’s state-owned energy company—has not yet been restricted. However, Europe is still scrambling to source its gas outside of Russia. German Chancellor Olaf Scholz on Sunday announced plans to build two liquefied gas terminals on the country’s Northern shore in order to import natural gas from more diverse sources.

Charted by Statista

source