Jim Sinclair, ages ago, told us that the moment the Obama administration threatened the Swiss with SWIFT expulsion over opening up its vaunted banking privacy rules was the equivalent of a nuclear first strike.
Previous to this threat SWIFT was as unknown to most people as the most arcane aspects of particle physics. It was the means by which money magically moved around the world. Without it modern finance and trade couldn’t exist and politicization of it was anathema because of that.
SWIFT is just code. It’s just a communications protocol. Code is easy to write. It can be copied, altered, secured and rewritten on the fly. It is not, in any way, a moat around any business.
I know what you bitcoin bears are thinking. Bitcoin is code that has been replicated, forked, copied, rewritten, etc. Yes, it can be. But it wouldn’t be bitcoin. And the ‘coins’ granted by the network are protected by something that can’t be replicated, math.
SWIFT transactions, in the same way, are secure because of encryption, just like bitcoin. But it is a centralized system supposedly independent, but Obama’s threatening the Swiss ended the illusion of who really controls it.
As an aside, if SWIFT were smart they would tokenize their system and grant governance rights to its users to provide a secondary market in securing use of their services.
What both SWIFT and bitcoin have in common is mindshare and, in SWIFT’s case, marketshare. Bitcoin is beset on all sides by up and comers trying to grab mind and market share from it — Litecoin, Ethereum classic, Monero, Decred, DASH, etc. They all compete for a place in the ecosystem.
SWIFT, being privately held in the same way that the central banks are privately held, is subject to the same competitive effects, but unlike bitcoin, and has a tremendous market share advantage over all other competitors.
In fact, until a few years ago, SWIFT had no competition. And, one could argue, and in fact Sinclair did at the time, SWIFT needs no competition. This is why SWIFT expulsion was such a big deal for anyone threatened with it. The idea that anyone would ever use it as a weapon to enforce domestic policy and as a tool of diplomacy and hybrid war was unthinkable because it would begin a financial arms race no one should want to pursue.
But with its monopoly and this inertia dominating, the Swiss were left flat-footed when this happened.
The fact that the Obama administration politicized SWIFT when it did ended an era of international finance. The world financial system ended any illusions it had over who was in charge and who dictated what terms.
The problem with that is once you go there, there’s no going back, which was Sinclair’s point over a decade ago.
Threatening Switzerland with SWIFT expulsion wasn’t a sign of strength, however, it was a sign of weakness. Only weak people bully their friends into submission. It showed that the U.S. had no leverage over than the Swiss other than SWIFT, a clear sign of desperation.
And that’s what the U.S. did when it pushed the big red ‘history eraser’ button.
The Swiss knuckled under. Its vaunted banking privacy is now a part of history.
Iran, however, in 2012, facing a similar threat from Obama, didn’t knuckle under and forced Obama to make good on his threat. Once you uncork the nuclear weapon you can’t threaten with lesser weapons, they have no sway. This is a lesson Donald Trump would learn the hard way since 2018.
The example made of Iran and the sweeping sanctions Obama put on Russia for daring to stop the taking of Ukraine by NATO finally prompted both Russia and China into real action to create alternatives to SWIFT. It is, after all, like Sinclair said, just code.
Three years later Iran used real nuclear weapons to force Obama back to the negotiating table and reinstate its position in the global financial system by acceding to the JCPOA. This agreement was pushed by the EU and Russia and rejected by the U.S. political establishment. Obama could only agree to it through executive order. It was never ratified by Congress, which is how Donald Trump pulled the U.S. out of the JCPOA in May 2018.
And it’s clear today the pivot away from pressuring Iran to isolating Russia is the plan for The Davos Crowd.
SWIFT expulsion from late 2012 to 2015 was terrible for Iran and Iranians, but it also made them stronger and harder. When Trump pushed the SWIFT button again abrogating the JCPOA at the behest of Israeli Prime Minister Benjamin Netanyahu and then National Security Advisor John Bolton and the results were the same.
With the JCPOA gone and Iran made a pariah the Iranian rial imploded, inflation soared but it also strengthened the hand of the conservative ‘mullahs’ and undermined the moderates led by President Hassan Rouhani. The humanitarian toll on Iran was horrific and only further undermined the U.S.’s position as a legitimate power.
Trump went much further than Obama, introducing sanctions which were meant to end all Iranian oil exports, an economic blockade the likes of which the world hadn’t seen since the lead up to Japan’s attack on Pearl Harbor in 1941. He openly threatened all of the U.S.’s allies with sanctions if they did business with Iran.
It was, by far, the most irresponsible thing Trump did as president and I still disagree with it at both a strategic and visceral level. It forced the world onto the path we’re on now, to global conflict rather than sitting down and carving the world up in a financial version of the meeting at Yalta in 1945.
Given the attempt being made today by the World Economic Forum and its main arm, the EU, to destroy the U.S. from both within and without, it’s clear Trump saw the JCPOA as the thing he could use to pull back on the reins of that strategy. So, I understand why he did it, but in the bigger picture all he did was continue Obama’s weakness.
The problem for Trump by then Iran wasn’t alone. It had a few more friends to assist it evading sanctions. It wasn’t just Turkey laundering oil money through its banks as gold deposits or India buying oil for grain and washing machines.
It was China straight up buying Iranian oil directly with yuan.
I said then that the sanctions wouldn’t work and I was right. It gave China the first real use case for internationalizing the yuan, adding liquidity to its oil futures contract trading in Shanghai and establishing itself as a major diplomatic player and investor in Middle East politics.
Sure Trump’s policies starved Iran of oil money but in today’s world where both Russia and China have SWIFT alternatives and bitcoin exists, does SWIFT even matter in this equation?
In a word no.
And that brings me to the latest example of western financial idiocy and yet another example of how weakness manifests itself projected as strength.
Against the backdrop of improving JCPOA negotiations in Vienna where it looks like the
Obama Biden administration is ready to reinstate the JCPOA without any major changes, the EU Parliament passed a resolution (which Angela Merkel et.al. will promptly ignore) demanding that Russia now be cut off from SWIFT and ending any energy imports from Russia if Russia violates Ukraine’s borders.
569 members of the European Parliament voted for approval while there were 67 against the resolution’s adoption. As we explained previously, it appears a ‘preventative’ and threatening measure in the instance of any future scenario of another major Russian troop build-up in Crimea and along Ukraine’s border such as occurred over the last month.
“Should military build-up lead to an invasion of Ukraine by Russia, the EU must make clear the consequences for such a violation of international law and norms would be severe, MEPs agreed,” a European Parliament press release stated. “Such a scenario must result in an immediate halt to EU imports of oil and gas from Russia, the exclusion of Russia from the SWIFT payment system and the freezing of assets and cancellation of visas for Europe of all oligarchs tied to the Russian authorities.”
There is a concerted push to demonize Russia for even existing. Europe, on behalf of the WEF, is trying to intimidate Russia into submission while offering the carrot of the JCPOA back to Iran.
It won’t work.
In fact, if you didn’t think that the Russia/China/Iran axis weren’t preparing for this outcome you would either be terminally naïve or a member of John Kerry’s Think Tank on K street. There is a desperation to this type of resolution that is hard to ignore.
Because Europe, as a major energy importer, could never survive shutting off access to Russian energy. That would truly be cutting off one’s nose to spite one’s face. It would either send Europe into a dark age or end SWIFT as the fulcrum on which global trade rests.
In fact, if Russia was cut out from the SWIFT system their next move would be to demand all payments for their energy through their own version of SWIFT, which is now fully functional. It would be an ‘act of war.’ That this resolution passed with just 67 against it tells me it has broad backing within the EU parliament of those in the pay of both George Soros’ Open Society Foundation and the World Economic Forum.
And this means they are willing to start World War III to make the world safe for communism and Climate Change.
Every move made by the EU at this point has to be viewed through this lens of consolidating power within it and then vesting it further in the United Nations. Because any conflict that emerges will be 1) blamed on ‘Russian aggression’ and 2) used as an excuse to bring the U.N. in to mediate.
Resolutions like this one are meant as soft power threats towards a country which just showed the world its willingness to deploy real military power to defend its future. Putin just spent 90 minutes outlining Russia’s future which mostly ignores the WEF’s Climate Change demands with his annual address to the State Duma.
If the goal of these actions is to decouple Europe from Russia then they may have a chance at achieving that. If the goal is to subjugate Russia by making the EU indispensable to Russia’s future then it has already failed spectacularly.
So, this resolution is either the height of virtue signaling by an irrelevant group of arrogant pols or it’s the next warning shot that there will be a future fight over Ukraine. Russia showed the lengths it would go to defend the Donbass and Crimea which clearly spooked a lot of people in Europe.
They may have averted a kinetic war now, but with the rise of the German Green party to the top of the polls, it’s clear the WEF’s strategy is to use them as the whip hand after Germany’s elections in the fall. I spoke about this at length with Alexander Mercouris of The Duran in a recent talk. Angela Merkel has been grooming the Greens for years for this takeover.
When the ideologically possessed Greens come into power in Germany EU policy will shift even more radically interventionist. Left? Right? These labels won’t matter. Liberal intervention is not much different than Conservative intervention. They are both, at their core, ideologically based.
And that ideology is to make the world safe for those who currently have the power.
SWIFT, under Obama, like all modern networking technology became a tool of ideology. And the ideology of the World Economic Forum is control. But, live by the sword, die by the sword because all technology is ultimately replicable and its cost of deployment eventually reaches its production costs. Such is the lesson of the free market.
SWIFT rose to prominence during a time when it was expensive to move information around the world. Now information is cheap. In a world where a new blockchain can be developed and deployed in a matter of days claiming monopoly power to control the flow of money is a fool’s errand.
Which is why I don’t think Russia, China or Iran really care one whit about what the EU parliament just said. If Iran could survive when there were no alternatives to SWIFT, Russia will invite a world where SWIFT is finally dead and buried and the threats to its national development.
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