SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the global financial system that allows immediate and secure transfers of money across borders. It is the web that verifies all financial transactions. It links 11,000 banks and institutions in more than 200 countries, with 40 million messages a day. Using SWIFT ensures that transactions happen in seconds in a secure way. Around 1% of those messages involve Russian payments, according to the BBC.

As part of the West sanctions against Russia, its banks have been banned from the SWIFT system. Additionally, the United States and the European Union have announced restrictions on the Russian central bank that block access to more than $600 billion in reserves. The Bank of Russia reports that only 22% of its international reserves are US Dollars, while gold accounts for 23%.

A few months ago, when investors started to discuss the troubles of Evergrande, China’s largest real estate developer, many economists saw the problem as isolated and insignificant. The consensus message was that the real estate crisis was containable and that the Evergrande default would be a single case. However, Chinese defaults on local and overseas bonds rose to a record $43 billion in 2021, according to Bloomberg, led by widespread defaults in the real estate sector.

Up until a week ago, the bonds of Zhenro Properties Group were seen as safe, and the company was widely perceived as a rare case of balance sheet strength in a troubled sector. Unfortunately, reality was significantly different, and the company warned that it may not meet its credit obligations.

The escalation of tension in Ukraine has reminded us of something many investors seemed to have forgotten: Geopolitical risk. Sanctions and the inevitable drop in trade have proven to generate a significant negative impact on the different economies involved. We know from the 2014 Ukraine crisis that the economic hit is severe and persistent.

The unemployment rate in the Euro Area fell to 7% in December and 6.4% in the European Union, compared with the United States at 3.9%. We cannot forget that these unemployment rates do not include furloughed jobs covered by unemployment retention schemes, which account for another 5 million workers waiting to return to normal activity.

After a fiscal stimulus plan of more than 5% of GDP in 2020 and another 4% in 2021 and the European Central Bank purchasing 100% of net issuances from most sovereigns, the recovery shows a concerning weakness. Furlough jobs are rising again, working hours are still below the pre-pandemic level and real wages are falling as inflation eats the recovery.