Worries about inflation, energy costs rise after Italy joins SWIFT expulsion of Russia

ROME, March 4 (Xinhua) -- Italy's decision to join some other countries to remove selected Russian banks from SWIFT, the payment system used for most international financial transactions, could lead to higher inflation and energy costs in the country, analysts have said.

Prices pushed higher in part by circumstances in Ukraine could slow Italy's economic recovery, the Observatory on Italian Public Accounts said last week.

Fears of rising prices have become front page news in Italy. According to Italian financial newspaper Il Sole 24 Ore, the "perceived" inflation rate in the country is higher than the actual one -- 6.4 percent compared to 4.8 percent -- and this had direct ties to the situation in Ukraine.

Meanwhile, Italy's consumer confidence continued to fall in February. According to data from the country's National Statistics Institute, the consumer confidence index dropped from 117.7 in December to 114.2 in January, and further to 112.4 in February.

Both business and consumer confidence remained high in the final months of 2021 despite uncertainty tied to the latest wave of the COVID-19 pandemic.

According to a joint statement released Saturday, the United States, the European Commission, France, Germany, Italy, Britain and Canada are supporting the expulsion of "selected Russian banks" from SWIFT "within the coming days," so as to "further isolate Russia from the international financial system" and their economies.

Also on Saturday, Italian Prime Minister Mario Draghi's office released a statement saying Draghi "reaffirmed to (Ukrainian) President (Volodymyr) Zelensky that Italy fully supports the EU's line on sanctions against Russia, including those regarding SWIFT, and shall continue to do so."

But Italy, according to analysts, had sent mixed signals over Russia before this. For example, it was hesitant about endorsing the SWIFT expulsion at first.

"Early in the crisis, Italy blocked some strong sanctions against Russia, partially in hope the situation would not escalate and partially out of the need for trade with Russia, especially for gas," Gian Franco Gallo, a political affairs analyst with ABS Securities in Milan, told Xinhua.

SWIFT is a Belgium-headquartered global provider of secure financial messaging services. It was formed in 1973 by 239 banks from 15 countries to solve the problem of cross-border payments communication.

More than 11,000 financial institutions are now using SWIFT for their financial transactions, including around 300 from Russia.

Analysts said that while the impact of the SWIFT expulsion on Russian banks is already being felt, the Italian banking system is also likely to see minor impacts stemming from such sanctions.

"We're already seeing the first impact on Russian banks, which is long lines at Russian banks and customers who can't even manage to exchange the ruble currency into small amounts like 10 or 20 U.S. dollars or euros," Eugenio Pinto, a professor of Business Administration from the Faculty of Economics at Rome's LUISS University, told Xinhua.

"Some Russian banks will remain connected, presumably to limit the impact on regular Russians and to allow for payment for gas sales," Pinto said.

Draghi said Tuesday that 95 percent of the natural gas Italy uses comes from imports, with more than 40 percent of such imports coming from Russia.

Given Italy's heavy reliance on energy imports from Russia, analysts believed that the country's payment for gas could be greater in the future.