When strong nations bully smaller nations and target people, they should expect a harsh response.
And any direct military involvement on the part of the West in the continuing conflict in U-----e is quite unlikely. Therefore, many people are demanding that Russia be subjected to severe economic penalties.
Now, public support has been strong for the decision to penalize the Russian central bank and exclude six Russian institutions from the SWIFT financial system.
The new restrictions on Russian commodities exports might cause chaos in international markets. And it may also contribute to the inflationary trends that have already led to soaring food and energy costs in recent months.
Some experts have even called this “weaponizing the US currency” and said it must be stopped.
The United States is arming itself with the dollar to maintain its economic and geopolitical dominance worldwide. In fact, it thinks rival companies pose an existential danger.
The US contributes around 20% of the global GDP. And dollars are used for more than half of all international trade and monetary reserves.
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Now, this is the result of the Bretton Woods Accord of 1944. The impact was magnified when the Nixon shock of 1971 severed the dollar’s relationship with gold. And the United States was, therefore, able to regulate the cash flow.
The centrality of the dollar, which the then-French finance minister described as an “exorbitant privilege.” And this makes it simple for the United States to cover its trade and budget deficits.
Moreover, because of its ability to buy goods and pay off its debts in domestic currency, the country is buffered from the effects of a global currency crisis.
US quantitative easing and other monetary measures can boost the dollar’s worth and provide the US an economic edge.
However, the dollar’s actual strength lies in its connection to sanctions programs.
Now, Washington may weaponize money transfers because of laws like the Patriot Act, the Trading With the Enemy Act, and the International Emergency Economic Powers Act.
In addition, the proposed Defending American Security from Kremlin Aggression Act and the Defending E-------s From Threats by Establishing Redlines Act will increase the capabilities of this arsenal.
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The United States now has unparalleled power over international economic activity thanks to its acquisition of Swift data. Swift is the worldwide messaging system of the Society for Worldwide Interbank Financial Telecommunication.
So, individuals, businesses, governments, and even nations can be hit with sanctions.
And due to secondary restrictions, companies, banks, and individuals from other countries are prevented from conducting business with the sanctioned organizations.
Basically, the United States has the required linkage to prosecute the offender or act against its American assets. This can happen if the offending dollar payment passes via a bank in the United States or the American payments system.
And with this power, the United States can punish foreign companies and individuals that do business with or provide financial support to a designated foreign t-------t organization.
Criminal prosecution can potentially disrupt financial, trade, and currency markets. Furthermore, this has the potential to significantly hamper the operations of non-Americans.
Listen to this. For breaking sanctions against Iran, Cuba, and Sudan, BNP Paribas SA paid $9 billion in fines and was banned from dollar clearing for a year.
Banks, including HSBC Holdings Plc, Standard Chartered Plc, Commerzbank AG, and Clear stream Banking SA, have all paid hefty fines for similar infractions.
United Co. Rusal had difficulty refinancing its dollar borrowings due to secondary penalties. And this occurred because international corporations, banks, and exchanges were pressured to cut ties with the Russian firm.
So, even though the company only sells 14 percent of its products in the US, doesn’t use American banks, and is listed in Moscow and Hong Kong, its bonds and shares still went down.
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