OPINION: The US dollar gives Washington enormous reach with its adversaries. But sanctions are a blunt instrument with little immediate impact on foreign policy objectives.
on Russian financial institutions and its central bank, adding to a raft of existing measures, some of which have been in place since the Russian annexation of Crimea in 2014.
The Russian economy will also feel the impact of export controls on high-tech goods – in particular, US use of its foreign direct product rule, which gives US law extra-territorial effect in relation to foreign-produced goods incorporating American content. The US controls and regulates the international clearing of US dollar transactions. This gives US financial sanctions enormous reach. Whether they are formally part of the sanctions regime or not, financial institutions cannot afford to risk losing access to the US-regulated dollar payments system by flouting sanctions.Economic and financial sanctions have been a go-to policy instrument for US policymakers in recent years, having been employed against Iran, Venezuela, China and Russia.
Other countries not part of the sanctions regime will continue to transact with Russia, including China, although even China will be wary of the far-reaching implications of US dollar dominance.
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