Russia May Ditch the Dollar – but it Needs the Euro

Summary:

Western nations have imposed severe sanctions on Russia in response to its invasion of Ukraine. The most immediately disruptive sanctions targeted the Russian financial system, impairing Russia’s ability to trade internationally and freezing around half of its nearly $600 billion foreign reserves.  Critics of these sanctions argue the West is self-sabotaging, for example by reneging  on the institutional promise that Western central banks will always honour claims against them and by politicising Western financial systems. They argue Russia, and other countries wanting to insure themselves against Western sanctions, will simply use their own currencies and payment systems, making future sanctions less effective. On the contrary, the West’s sanctions do little to undermine Western predominance in the global financial system. The opposite is true. Russia is desperate to insist that it is, unlike the West, a reliable business partner. But the more Russia politicises its financial systems – for example, by Russia forcing its exporters to sell most of their foreign currency to the central bank, or unilaterally deciding Europeans must pay for gas in roubles – the greater the protection offered by Western currencies will be.

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ESO Records

Cardiff EDC: Russian military invasion of Ukraine (2022) https://www.europeansources.info/record/russia-invades-ukraine-february-2022/

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