Weaponisation of finance: how the west unleashed ‘shock and awe’ on Russia
The sanctions on Russia’s central bank use the omnipresence of the US dollar to penalise an American adversary
The plan agreed by Yellen and Draghi to freeze a large part of Moscow’s $643bn of foreign currency reserves was something very different: they were effectively declaring financial war on Russia.
FT 6 april 2022
https://www.ft.com/content/5b397d6b-bde4-4a8c-b9a4-080485d6c64a
Financial warfare: will there be a backlash against the dollar?
The sanctions freezing Russia’s foreign currency reserves have created an incentive for countries to bypass the US currency
FT 7 April 2022
https://www.ft.com/content/220db8f2-2980-410f-aab8-f471369ac3cf
“Dollar Hegemony Ended Last Wednesday“
Every country in the world now realizes its reserves and assets in foreign banks are subject to seizure I’m not arguing that’s bad; I am suggesting it’s new.
John Mauldin 4 March 2022
https://englundmacro.blogspot.com/2022/03/dollar-hegemony-ended-last-wednesday.html
The U.S. Treasury Department this week blocked Russia from paying off a bond
it had due on Monday by denying a sanctions waiver to JPMorgan Chase & Co. to process the transfer.
Unlike previous defaults, Russia has plenty of money to pay off its debts, with $600 billion of foreign currency reserves and billions of dollars in new revenue each week from sales of oil and gas that continue thanks to exceptions written into sanctions policy.
But U.S. and European sanctions on Russia’s central bank and finance ministry have hemmed in what it can do with the money.
WSJ 7 April 2022
https://www.wsj.com/articles/why-russia-doesnt-want-to-defaulteven-in-a-time-of-war-11649336269
US Sanction Policy Forces Russia to Default
The Biden administration is hell bent on making Russia default on its US dollar debt payments that are coming due. This is not a good idea.
Essentially, the US is forcing Russia to not pay its bills which means Russia keeps its Euro and dollar reserves.
How Silly is This?
From a practical standpoint, the US should want Russia to diminish its reserves as quickly as possibly. Instead, US policy will force Russia to keep its reserves.
What About Legality?
Assuming Russia defaults, the US will have forced that outcome. How can this possibly be legal?
We are supposed to be a nation of laws.
Mish 7 April 2022
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