Where banks have the most outstanding debt from Russia [Infographic]

Taiwan and South Korea were the latest additions on Monday and Tuesday to the Swift ban on Russia that was carried out by Western powers and their allies during the country’s invasion of Ukraine. In addition to blocking major Russian banks from the international payment system, the two will also participate in strategic sanctions on semiconductor exports to Russia, Reuters reports.

EU member states, the UK, US, Japan and Canada already decided to ban Russian banks from Swift last week to limit the country’s ability to export goods and earn money to fund his war effort in Ukraine. But the move also means that Russian debtors will not be able to pay their bills to foreign banks if they are located in a country that has blacklisted Russian financial providers.

As data from the Bank for International Settlements shows, Taiwan’s move can be seen as largely symbolic, as exposure to claims on Russia is minimal, at around $184 million. The amount of money that Russian entities owe but may struggle to repay is higher in South Korea at $1.7 billion and Japan at $9.6 billion. This places the latter country in fifth place among the countries most exposed to Russian debt among the 25 countries on which the BRI collects data.

Exposure to unpaid Russian debt was highest in Italy and France, where more than $25 billion is owed each. In Austria and the United States, exposure was $17.5 billion and $14.7 billion, respectively. One of the reasons why Austria ranks high is that one of the country’s biggest banks, Raiffeisen, has a very active Russian subsidiary, which is one of the most lucrative parts of the business. The country also maintains close commercial ties with Russia in the field of energy, Standard reports. Austria, along with Germany, Italy and Hungary, were reportedly among those who opposed Swift’s ban at first.

Will the market need help?

It is still unclear how big the consequences of Russia’s unpaid dues will be. Not all debts listed by the BIS were supposed to be repaid immediately. Yet Credit Suisse strategist Zoltan Pozsar compared the scenario to the Lehman brothers’ bankruptcy in 2008 as well as the pandemic crisis of March 2020, when liquidity problems in the US market caused by a nonpaying bank or non-paying banks had to be fixed by the Fed.

As a further consequence, EU and G7 countries will also not be able to send money to banned Russian banks to pay for goods or services. Although there has been much discussion about whether this means that Europe will not be able to pay for the natural gas it receives from Russia, Gazprombank – which handles a large part of these payments as financial arm of the Russian state energy company – has not yet been restricted. However, Europe is still struggling to source gas from outside Russia. German Chancellor Olaf Scholz on Sunday announced plans to build two liquefied gas terminals on the country’s northern shore to import natural gas from more diverse sources.

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