Market Loop - 🏃Swift moves

• BP agreeing to offload their stake in Russian government owned oil firm Rosneft.
• Roman Abramovich handing over the running of Chelsea FC to a board of trustees.
• The West announcing plans to ban some Russian banks from the global payments system SWIFT (more below).

RUSSIA
Russian banks banned from global payments system

What’s going on?
After much debate the UK, EU, US, and Canada have agreed to ban some Russian banks from the global financial messaging system called SWIFT.

Why is this important?

Since Russia’s invasion of Ukraine almost a week ago Western allies have dropped a series of heavy sanctions on Russian banks, businesses and individuals. But banning Russia from SWIFT was seen by many as a step too far. However over the weekend an agreement was reached to expel some Russian banks from the system.

What’s SWIFT? Created in 1973 the Society for Worldwide Interbank Financial Telecommunications (SWIFT) runs a messaging service that enables transactions across over 11,000 banks and institutions around the world. It makes sending cash between countries fast and easy and is used by every single country, bar North Korea.

Russia is a major user of SWIFT, it’s estimated that around 1% of all transactions involve the country and it ranks sixth in global users. Cutting it out of SWIFT would make doing international business more difficult. 

The UK and Ukraine were all for doing this but other allies including the EU and US were more reluctant. That’s mainly because Russia is the EU's main supplier of oil and gas, and at a time when energy prices are at record highs, governments are keen to avoid any supply disruptions.

Also the US was concerned that booting Russia out of SWIFT could see it move economically closer to China, for instance by developing together an alternative payment system that could one day uproot the US dollar as the world’s most preferred currency.

Zooming out

CONSUMER
John Lewis ends century long price promise

John Lewis is scrapping its ‘Never Knowingly Undersold’ promise this summer, acknowledging that consumers have changed the way they shop. First introduced in 1925, the retailer pledges to refund customers the difference if they find the same item on sale elsewhere cheaper within 28 days. 

But it didn’t apply to online shopping which, in an age of ecommerce, makes the slogan outdated. Almost a third of non-food sales are done online and high street retailers have been losing market share to the likes of Amazon for years. 

John Lewis says that instead this year it will invest £500m in keeping prices low, a 25% increase on 2021. It will also expand its ‘Anyday’ value range which was introduced last April and has clocked up sales of £125m so far. 

But how much will ‘Never Knowingly Undersold’ be missed? In reality the pledge was rarely used by shoppers – less than 1% - with it being little more than a marketing ploy. MoneySavingExpert founder Martin Lewis says that it gives an arguably false impression that John Lewis is cheap as only a minority of consumers are price sensitive enough to care which allows John Lewis to charge what it likes to everyone else.