US economic sanctions against Russia

There is so much antipathy toward Russia that there is little criticism about the United States, but in the early days of the war, many people were disappointed by the attitude of the United States as the big brother of the liberal democratic camp, seeing the United States try to avoid all-out war with Russia.

I don't want to defend Biden, but it's true that wars between great powers are hard to break out in modern times.
This is because war between great powers is a game in which no one can be a winner, and everyone becomes a loser.

So how does the United States fight against countries with a certain level of national power other than those with absolute weaknesses like Iraq and Afghanistan?

I would like to talk about the way the United States fights against other countries through various examples since the 2000s.

The U.S. strategy to defeat the opponent will be realized in two major areas.
It is "trade regulation and exchange rate regulation."
And here, +@ is the "Swift Code Elimination," which is called a financial nuclear weapon.
For your information, exchange rate regulations and the exit of SWIFT codes are key currency countries and unique skills of the United States, the world's strongest country.



1. Trade Regulations
Trade regulations are largely implemented in four ways: " 보복 retaliatory tariffs, 수입 suspension of imports, 수출 suspension of exports, 상대 restriction of investment in other countries."

① Retaliation Tariff: Tariff mainly refers to the import tax imposed when importing goods, but retaliatory tariffs refer to a method of imposing high import taxes on exports of other countries.
Increase in tariffs > Increase in import prices > Decrease in imports (=Reduce exports to counterparties) > Economic deterioration of counterparties (decrease in national income and employment)
In the modern international community, where free trade is important, the Trump administration imposed a 25% tariff on Chinese goods (parts, computers, cell phones, etc.) in 2018, usually between 0-10% (depending on items).
In retaliation, China imposed a 25% tariff on U.S. agricultural products and automobiles.

② Suspension of imports: The suspension of imports from other countries without importing some goods at all can be seen as a tougher measure than retaliatory tariffs. Imposing high tariffs to reduce imports and prevent imports altogether is another dimension.
During the U.S.-China trade war, China stopped importing U.S. crude oil.

③ Discontinuation of exports: Literally not exporting its goods to other countries, but suspension of exports is a measure that is less effective than suspension of imports. It's good if your country's goods sell a lot overseas, but you don't have to stop them, do you?
However, if the conflict intensifies, even exports may be suspended. The items that are discontinued here are mainly essential items for the other party.
In the Australian-China trade dispute in the 2020s, Australia hit China by restricting iron ore exports.

④ Restriction on investment in companies in other countries: No matter how good the item is, you can't do business without money, so financing is a very important issue for a company's growth. Companies raise funds largely through methods such as listing on the stock market, issuing bonds, and lending to banks, and many Chinese companies try to raise funds by listing them on the U.S. stock market (NASDAQ, New York Stock Exchange). (China has a lot of regulations and the United States is a big player in the global financial market.)
The U.S. "reviewed" Chinese companies' suspension of listing on the U.S. stock market, U.S. pension funds' restrictions on investment in Chinese companies, and funds' restrictions on incorporation of Chinese stocks as investment restrictions in China. The reason why I emphasized "review" is that there are few cards that have actually been realized. They seem to have judged that the impact on the capital market and the backlash from investors in the U.S. are bigger problems compared to the gains from implementation.

In fact, this trade regulation is like a "jab" in boxing. I stretch my fist hard, but it's hard to knock the other person out.
It is difficult to defeat huge countries such as the United States and China just by limiting "some" items. (The U.S.-China trade war has been temporarily lulled by the failure of COVID-19 and Trump's re-election, but I don't know what would have happened if it had not been ongoing and intensifying.)
The scary card that makes the other person faint is the "exchange rate" that I'll explain.



2. Exchange Rate Regulation
If trade regulation is a "jab," exchange rate regulation can be seen as a "straight" that makes you faint at once if it goes in properly.

This is because trade regulations do not hurt the entire people/company of the other country as long as the regulated items are "some," and if trade with other countries can be increased, even if it is not the United States, it can offset some damage.

However, the exchange rate is a representative macro indicator that affects almost all people and companies immediately after a change, and if the change is large and takes place in a short period of time, its destructive power is simply enormous.

(There must be a reason why Korea is trying to keep the won-dollar exchange rate between 1,100 and 1,200 won.))
Turkey is the country that the U.S. has recently adjusted at the exchange rate.

In 2018, Trump said, "Make America Great Again" that the country that stood out here and there was Turkey, and the U.S. tariff attack caused the exchange rate to soar more than 40% (the Turkish lira's value to plunge) within a few months.
The general view is that if the exchange rate rises, exports will increase, the current account will improve, and the national economy will grow, but if the exchange rate rises in a short period of time, inflation will soar and the national economy will be difficult.



3.Russian bank's exit from SWIFT code
Actually, I wanted to talk to the general public about the exit of SWIFT code, so I wrote this article.
Before we talk about what the SWIFT code is and what it's all about in the media, let me explain the background!

Isn't it easy to transfer money in Korea? If it's not a large amount, I can transfer money in seconds.
However, as anyone who has made overseas remittances would know, the procedure is very difficult.

The sender/recipient's name, address and contact information are basic, and the purpose of the remittance, the recipient's account should be written in which country the bank is located, and what is the international code number of the bank (this is the SWIFT code).

When you remit more than a certain amount, you must also submit data to prove the reason for sending the money.
Money is not transferred in real time either. It depends on the situation of banks in each country, but it takes a few days to 10 days.

The reason why overseas remittances are more difficult than domestic remittances is to prevent crimes such as abnormal outflow of national wealth and money laundering.

In this way, not only Korea but also almost all countries regulate overseas remittances, but remittances are mainly made through banks, right?

Then, we need a reliable international payment network that safely connects remittances and payments between tens of thousands of banks in each country and stores and processes transaction data, right?

That's an international association called SWIFT, and the code given to each bank there is SWIFT code!
For example, in the case of Shinhan Bank, it will be SHBKRSE, which combines SHBK (Shinhan Bank), KR (Korea National Code), and SE (Seoul Code where the headquarters are located).

This SWIFT code is not given to all financial companies.
It is given to financial companies with high reliability to trust overseas remittances. (Shinhyup, Korea Federation of Community Credit Cooperatives, savings banks, etc. have not yet received SWIFT codes)
Some Russian banks must have been given this SWIFT code, and what is an issue now is that they will exclude the SWIFT code of these Russian banks.

If a Russian company sells goods to other countries, the payment will be received through SWIFT, but if the SWIFT code is excluded, it won't be easy to receive money, right? It's hard to send money, so it'll be hard to earn money. Then Russia's trade will shrink, right? The more the closed economy becomes, the more Russia's economy will retreat.

Inflation is a bonus. If the SWIFT code is excluded, the value of the Russian ruble, which cannot be exchanged for the dollar in the foreign exchange market, which is the key currency, will be very low. Then prices will soar.
(FYI, even if the SWIFT code is blocked, it is possible to make a detour to other payment methods. However, not many companies will want to do business with Russian companies even while using less safe and efficient payment methods.)

This is why the withdrawal of the SWIFT code is such a strong measure that it is also called a "financial nuclear weapon," and the precedent is so rare that the case of Iran or North Korea remains.

In the case of Iran, SWIFT was excluded in 2012 while developing nuclear weapons, and as a result, the economy fell into the abyss, and even if oil was sold, it was not paid, so it was a situation of receiving gold or bartering.

As explained so far, the U.S. uses three major strategies (trade regulation, exchange rate regulation, and exit of SWIFT code) in economic disputes (freezing assets is a service), and so far, the U.S. has engaged in economic disputes with many countries, but few have mobilized all of these strategies. (Not for normal countries other than abnormal countries such as Iran and North Korea.)

But I'm going to do almost everything about Russia.
I don't want the U.S. to look down on Russia for not engaging in an all-out war. The U.S. is seriously determined to beat Russia...
(There seems to be a message for China, too. "If you mess with me, I'll give you credit".)

In addition, the United States is mobilizing companies to pressure Russia.
S&P lowered its credit rating to CCC in Russia -> "Actually, don't invest in Russia."
Visa/Master Card Service Discontinued -> Payment is not possible with Visa or MasterCard. aggravating public discomfort and shrinking transactions
Withdrawal of McDonald's -> You won't be able to taste capitalism.
Microsoft, Adobe: Stop selling all products -> Too harsh for civilized people

It's not just domestic companies.
The U.S. alone is as good as a nuclear punch, but almost all democratic liberal countries have Russia George.