The NATO-Russia conflict playing out in Ukraine has brought to the fore long-simmering international tensions. These include the role of the US Dollar as the global reserve currency, and the power of the US government to unilaterally exclude nations that challenge its dominance from international trade, by sanctions and bans from international payment systems like SWIFT.
US economist Michael Hudson likens recent US financial sanctions on Russia to “shooting themselves in their own foot”. They are in reality providing Russia – the 11th largest economy in the world and home to the largest natural gas reserves in the world – a powerful incentive to find alternative mediums of exchange and payments systems so as to conduct trade. In addition, US sanctions signal larger economies like China toward the growing need to diversify away from dollar-denominated assets in order to manage economic and geopolitical risks.