You may have wondered what exactly the consequences are of the sanctions placed upon Russia following its war against Ukraine. My understanding is that the impact of Russian banks’ exclusion from SWIFT is overrated but that the sanctions against Russia’s Central Bank are much harder to overcome and cut to the very bone of the nation’s economy.
In addition, the suspension of Visa and MasterCard transactions in Russia has to be devastating. How? Let me offer a very minor, pedestrian example from personal experience.
It almost sounds ridiculous to say it, but most Americans, especially under age 30, don’t even have the first idea what happens in a situation when their plastic cards don’t work — when they need cash. I recently had a situation along these lines. I needed $200 in cash for a large quantity of firewood. But I did not plan well: I forgot to bring my bank card with me while on vacation. I only had credit cards. So the ATM was not an option — just as it is not an option today for so many Russians facing bank runs.
Fortunately, I was a lot closer to Moscow, Idaho, than Moscow, Russia. I was able to drive 38 miles to the nearest bank branch, where I could get $200 cash just by showing a driver’s license (there was no line).
Had I been living and banking in the world of 1970, I probably would have entered this situation better prepared, knowing I would need the cash in my pocket. I would have planned better in advance.
But even that understates the difficulties Russians must be facing now. Their currency has just lost 40% of its value. For many of them, it is impossible to get cash out of any ATM. And if they own stock traded on Russian markets, they have been unable to bail out for a week now, all because of Putin.
You should probably feel a little bit sorry for the average Russian consumer right now. He or she can’t even use electronic means of payment — credit cards, Apple Pay, and all the rest. Meanwhile, cash, to quote Humphrey Bogart, isn’t even accepted at the bar. And something more complicated, like getting a mortgage? Yeah, right.
Still, don’t feel too sorry. This pressure is needed to bring Putin’s regime down.
As NATO shies away from helping Ukraine, citing the possibility of a larger war, this is a reminder of Medieval times. The Catholic Church was once able to exert enough pressure on the secular rulers of Western Europe — the kings, princes, and emperors — that it could bring them to their knees by imposing an interdict. This entailed the denial of the sacraments to all people living within their borders. In theory, this would motivate people to disobey and even overthrow their rulers.
Today, the West is attempting to find out whether banks possess this power of interdict. It is an idea both appealing and terrifying at the same time. One would like to think that Putin and all others who wage war against other countries could be brought to their knees in this manner. On the other hand, what happens if banks start aggressively targeting Americans who participate in politically incorrect activities — who manufacture guns or drill for oil and gas, for example?
This is not some kind of imaginary problem or conspiracy theory: Actual Biden nominees have taken the position that banks should discriminate against such lawful businesses.
This economic interdict can work, but only if it is used against the real Nazis like Putin and not just the political adversaries whom the Left is, of course, always far too willing to call Nazis. If it is used for domestic politics, it will only destroy the banking system and turn every Western country into what Russia is experiencing now.
