Events
On February 26, the United States, the European Union, the United Kingdom and Canada issued a joint statement on sanctions against Russia. The United States and its allies promised to remove the selected Russian banks from the swift system. Secondly, the statement said it would implement restrictive measures to prevent the Russian central bank from deploying its international reserves in a way that undermines the impact of sanctions. Finally, in order to ensure the effective implementation of financial sanctions, the United States said it would identify and freeze the assets of sanctioned individuals and companies within its jurisdiction.
Comments
Swift is widely used, and there is no mature scheme that can be completely replaced. Swift is fully known as the global Interbank Financial Telecommunications Association. At present, more than 11000 banks and other financial institutions and enterprises in more than 200 countries and regions use swift system for financial information transmission. Swift sanctions mean cutting off the connection between a country’s financial institutions and the swift system. In fact, it cuts off the connection between financial institutions and the global banking system, and will not be able to make cross-border collection and payment, thus affecting international trade. Although the Russian side developed the SPFS system in 2019 and tried to find an alternative to swift, compared with the swift system, SPFS is still dwarfed in terms of the number, frequency and scope of users. At present, there is no mature scheme that can completely replace swift.
Russia is subject to swift sanctions, and cross-border transactions may be affected. According to the Russian swift Association, a total of about 300 Russian financial institutions use swift, which handles more than 80% of Russia’s international settlement. According to wind data, Russia’s total international trade in 2020 was 573 billion US dollars, accounting for 40.5% of GDP. In terms of export products, oil, natural gas, Shenzhen Agricultural Products Group Co.Ltd(000061) , chemical fertilizer, etc. are the most important components.
Russia is a major exporter of potash fertilizer, accounting for 19% of the total global exports. According to NRCan data, Russia’s potassium chloride production accounted for 20.0% of the global total in 2020. In terms of export volume, the export volume of Russian potassium chloride in 2020 was 10.84 million tons, accounting for 19.0% of the total global export trade. Russian potash fertilizer is mainly exported to large agricultural countries and potassium poor areas. According to the annual report data of Ural, Russia’s largest potash fertilizer producer, the local sales in Russia accounted for only 17.1% in 2020. The remaining potash fertilizer is mainly sold to China, India, the United States and Latin America and Southeast Asia, of which 37.6% is sold to China, India and Southeast Asian countries, and 29.6% is sold to Latin America and the United States.
The sanctions rules have not yet been implemented. If the export of Russia is restricted after the sanctions are clear, the export of potassium fertilizer may be involved. At present, the swift sanctions against Russia are only a joint statement, the specific sanctions have not yet been implemented, and the implementation time and financial institutions covered are not clear. If the future sanctions are further clarified, Russia’s import and export trade may be affected, thereby affecting the export of potash fertilizer.
Investment advice
Pay attention to the benefit targets under the continuous tight supply of potash fertilizer industry, such as Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qinghai Salt Lake Industry Co.Ltd(000792) , Zangger mining, Qingdao East Steel Tower Stock Co.Ltd(002545) .
Risk tips
Changes in geopolitical situation, repeated overseas epidemics, exchange rate changes, etc.
