The weaponization of finance has profound implications for the future of international politics and economics
. Many of the basic assumptions about the post cold war era are being turned on their head. Globalisation was once sold as a barrier to conflict, a web of dependencies that would bring former foes ever closer together. Instead, it has become a new battleground.
Of course, there are huge risks in such an approach. The central bank sanctions could prompt a backlash against the dollar’s dominance in global finance. In the five weeks since the measures were first imposed, the Russian rouble has recovered much of the ground it initially lost and officials in Moscow claim they will find ways around the sanctions.Article content
Treasury officials also negotiated to gain access to data about suspected terrorists from Swift, the Belgium-based messaging system that is the switchboard for international financial transactions — the first step in an expanded network of intelligence on money moving around the world.Article content
During the Obama administration, when the White House was facing pressure to take military action against its nuclear installations, the U.S. imposed sanctions on Iran’s central bank — the final stage in a campaign to strangle its economy. Russia’s reserves increased after its 2014 annexation of Crimea as it sought insurance against future U.S. sanctions — earning the term “Fortress Russia”. China’s large holdings of U.S. Treasury bonds were once seen as a potential source of geopolitical leverage. “How do you deal toughly with your banker?” then secretary of state Hillary Clinton asked in 2009.
Biden asked Yellen to draw up plans for what measures could be taken to respond to an invasion. From that moment the U.S. began coordinating with the EU, U.K. and others. A senior state department official says that between then and the February 24 invasion, top Biden administration officials spent “an average of 10 to 15 hours a week on secure calls or video conferences with the EU and member states” to co-ordinate the sanctions.
We have never had in the history of the European Union such close contacts with the Americans on a security issue as we have now — it's really unprecedented “We have never had in the history of the European Union such close contacts with the Americans on a security issue as we have now — it’s really unprecedented,” says one senior EU official.Italy’s Prime Minister Mario Draghi speaks during a joint news conference in Rome, Sept. 29, 2021.In the end, the move against Russia’s central bank was the product of 72 hours of intensive diplomacy.
In Europe, it was Draghi who pushed the idea of sanctioning the central bank at the emergency EU summit on the night of the invasion. Italy, a big importer of Russian gas, had often been hesitant in the past about sanctions. But the Italian leader argued that Russia’s stockpile of reserves could be used to cushion the blow of other sanctions, according to one EU official.
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