Ukraine war to give China chance to escape US hegemony over SWIFT, CHIPS and the dollar?
Cutting some Russian banks’ access to SWIFT — the messaging network at the heart of global movement of money — may be a highly effective punishment for President Vladimir Putin’s invasion of Ukraine. But it will give other geopolitical rivals, especially China, the excuse to promote digital versions of their own central banks’ money in global trade and finance. That could weaken the dollar’s international clout. The key pillars of U.S. economic hegemony are SWIFT, CHIPS, and the dollar. Weaponizing any one of them against the banking system of Russia, the 11th largest economy, will convince China that it needs an alternative to the trifecta to escape the ambit of American power.
Based in Brussels, but with a data center in Virginia, the cooperatively owned Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is a “financial panopticon” that allows Washington to surveil cross-border fund flows. However, the actual policing often comes out of New York, where 95% of the world’s dollar payments are irrevocably settled.
The Clearing House Interbank Payments System, or CHIPS, is a private club of financial institutions. Its 43 members settle $1.8 trillion in claims every day using a pre-funded account at the Federal Reserve. They all maintain U.S offices, and are subject to U.S. law, which makes it easier for authorities to catch and punish. Millions of dollars in fees aren’t really worth the nearly $13 billion that CHIPS members like BNP Paribas SA, Standard Chartered Plc and others have paid in fines over nearly two decades of Iran-related sanction violations.
As an instrument of American power, CHIPS hasn’t gone unnoticed in Beijing. In the Canadian court battle to stop the extradition to the U.S. of Huawei
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