Limiting Russia's access to the dollar. What is the impact?
Washington, D.C. — What is the impact on Russia in the West limiting its reach to transact in the US dollar in a fresh wave of sanctions against Moscow?
“The bottom line is that these sanctions will have a significant impact Russia’s overall economy, and average Russians will feel the cost,” says Clay Lowery, Executive VP for the Institute of International Finance.
The statement was released following the sanctions on Russia after its invasion of Ukraine.
Today, U.S. President Biden announced, along with 27 EU members and G7 members, additional economic sanctions on Russia that consist of:
- Limiting Russia’s ability to transact in U.S. dollars, euros, pounds and yen;
- Limiting financing to grow Russia’s military;
- Freezing the assets of four additional major Russian banks; and
- Making it more difficult for Russia to compete in the tech economy via export controls.
Russia and SWIFT
These new sanctions do not include disconnecting Russia from the SWIFT global payments system, but the U.S. signaled this option was still on the table, leaving room for escalation.
“The bottom line is that these sanctions will have a significant impact Russia’s overall economy, and average Russians will feel the cost. These sanctions target Russia’s domestic financial system, causing bank runs and forcing Russia’s central bank to continue hiking rates.
“As a result, we are likely to see negative growth in an economy that has already been hindered by increasing isolationism,” says Lowery.
In addition to the economic repercussions, this conflict is a human tragedy. Our thoughts are with those in the region whose lives have been affected,’ he adds.
The IIF has published several recent reports exploring the possible economic impacts of Western sanctions on Russia and tensions in the Ukraine region (below): and is preparing a comprehensive report to be released Monday.