International Credit Systems

How International Credit Works

• The role of trust in international finance
• Correspondent banking relationships
• TODO: explain credit lines between banks
• TODO: trade finance and letters of credit

The SWIFT System as Financial Infrastructure

• Not a payment system - a messaging system:

  • TODO: how banks communicate
  • TODO: why it became critical infrastructure

• Near-monopoly status:

  • TODO: 11,000+ institutions in 200+ countries
  • TODO: handles trillions daily

Case Study: Russia and SWIFT Sanctions (2022)

What Happened

• Following the Ukraine invasion in February 2022:
  • TODO: timeline of sanctions
  • TODO: which Russian banks were cut off
  • TODO: which were exempted (and why - energy payments)

Immediate Effects

• Russian banks unable to send/receive international payments

• Ruble collapse:

  • TODO: exchange rate volatility
  • TODO: capital controls implemented

• Trade disruption:

  • TODO: import/export challenges
  • TODO: payment workarounds attempted

Workarounds Russia Attempted

• SPFS (System for Transfer of Financial Messages):

  • TODO: Russia's domestic alternative
  • TODO: limited international adoption

• CIPS (Cross-Border Interbank Payment System):

  • TODO: China's alternative
  • TODO: growing usage post-sanctions

• Bilateral currency agreements:

  • TODO: trading in rubles and yuan
  • TODO: rupee arrangements with India

• Cryptocurrency:

  • TODO: attempts to use crypto for sanctions evasion
  • TODO: limited success and challenges

Other Historical Examples

• Iran sanctions:

  • TODO: 2012 and 2018 SWIFT disconnections
  • TODO: impact on Iranian economy

• North Korea:

  • TODO: largely disconnected from global finance
  • TODO: how they've adapted

Alternative Systems to SWIFT

CIPS (China)

• TODO: launched 2015
• TODO: current adoption
• TODO: limitations

SPFS (Russia)

• TODO: launched 2014
• TODO: domestic vs international use

INSTEX (Europe)

• TODO: designed for Iran trade
• TODO: limited success

What "Cutting Off Credit" Actually Means

• Banks can't confirm counterparties are legitimate
• Letters of credit become impossible
• Trade finance grinds to halt
• TODO: practical examples

Implications for Global Finance

• Weaponization of financial infrastructure:

  • TODO: concerns from non-Western countries
  • TODO: push for alternatives

• Dollar hegemony:

  • TODO: why USD matters in international trade
  • TODO: de-dollarization efforts

References

• TODO: Add references