Punishing Putin: The Age of Financial Warfare and Omnipresence of the Dollar

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“Responsible nations have to come together to hold these perpetrators accountable,” stated President Joe Biden as he cited scenes of “major war crimes” being committed in Ukraine by Russian forces. [1] Since Russia’s withdrawal from areas surrounding the capital city of Kyiv, the White House has announced new economic sanctions on some of Russia’s largest financial institutions and most high-profile individuals with connections to the Kremlin. [2]

Sanctions imposed on Russia mark the beginning of a new era of economic warfare that could further fragment the global economy. The West’s current sanctions on the former Soviet state are “as aggressive an unplugging of the Russian financial and commercial system as you can imagine,” said former senior White House official Juan Zarate. [3] These measures are so potent that they have economically hobbled Russia’s $1.6tn economy and resulted in Vladimir Putin threatening to use his nuclear arsenal. [4] This new approach to conflict has been two decades in the making. The shift away from costly military interventions and towards the weaponization of the dollar and other major western currencies has become the national security policy of choice for some, especially in the absence of diplomatic solutions. [5] Although weaponizing finance could permit more accurate targeting than conventional warfare, it by no means allows for perfect control. [6] Yet, when combined with other forms of pressure such as military presence, economic conflict is emerging as an increasingly likely possibility. [7]

The success of financial warfare hinges on the omnipresence of the dollar. [8] Not only is the dollar the most-used currency in foreign markets, trade, and investment transactions; but US capital markets are amongst the largest in the world.US Treasury bonds act somewhat as a “barometer of investors’ collective wisdom about the future path of the world’s largest economy.” [9] Foreign central banks, financial institutions, and even multinational corporations lack the financial mobility to operate without access to the dollar and American financial ecosystems. [10] Coupled with the European Commission’s renewed sanctions, Russia’s dependence on major currencies such as the Euro, the Pound, and the Swiss Franc will only further the impact of such sanctions. 

This is not the first time the US has imposed financial sanctions on foreign central banks. Isolated regimes such as Iran and North Korea have previously been subjected to the wrath of weaponized finance. [11] However, financial warfare has never been used against a large economy like Russia. [12] The consequences of such an approach are potentially far-reaching. One of the major concerns is how imposing sanctions could backfire against the US: it could diminish the dollar’s dominance, thereby accelerating the shift towards a bipolar financial order that is based on both the dollar and the renminbi. [13]

Still, the use of financial warfare indicates a new approach to foreign policy and the possible revitalization of a transatlantic alliance. While sanctions may have been ineffective in deterring Putin from invading Ukraine, collaboration between western nations since the invasion has been taking place at an “unprecedented pace.” [14]


[1] The White House. “Remarks by President Biden at North America’s Building Trades Unions Legislative Conference”. April 6, 2022. https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/04/06/remarks-by-president-biden-at-north-americas-building-trades-unions-legislative-conference/#:~:text=Responsible%20nations%20have%20to%20come,further%20increase%20Russia’s%20economic%20isolation. Accessed April 7, 2022.

[2] Liptak, Kevin., Klein, Betsey., & Collins, Kaitlan. “Biden says ‘major war crimes’ being discovered in Ukraine after he announces new sanctions on Russia”. April 6, 2022. https://www.cnn.com/2022/04/06/politics/us-latest-sanctions-on-russia/index.html. Accessed April 7, 2022.

[3] Pop, Valentina., Fleming, Sam., & Politi, James. “Weaponisation of finance: how the west unleashed ‘shock and awe’ on Russia”. April 6, 2022. https://www.ft.com/content/5b397d6b-bde4-4a8c-b9a4-080485d6c64a. Accessed April 7, 2022.

[4] Ibid.

[5] Ibid.

[6] Bracken, Paul. “Financial Warfare”. Orbis, 51(4), 685-696. https://doi.org/10.1016/j.orbis.2007.08.010.

[7] Ibid.

[8] Pop, Fleming, & Politi, supra note 3.

[9] Bruce-Lockhart, Chelsea., Lewis, Emma., & Stubbington, Tommy. “ An inverted yield curve: why investors are watching closely”. April 6, 2022. https://ig.ft.com/the-yield-curve-explained/. Accessed April 7, 2022.

[10] Pop, Fleming, & Politi, supra note 3.

[11] McNabb, Stephen. M., & Caine, Kim. “US imposes stiff sanctions on Russia, Iran and North Korea”. August 8, 2017. https://www.nortonrosefulbright.com/en/knowledge/publications/040914b1/us-imposes-stiff-sanctions-on-russia-iran-and-north-korea. Accessed April 7, 2022.

[12] Pop, Fleming, & Politi, supra note 3.

[13] Ibid.

[14] The White House. “Press Briefing by Press Secretary Jen Psaki and National Security Advisor Jake Sullivan”. April 4, 2022. https://www.whitehouse.gov/briefing-room/press-briefings/2022/04/04/press-briefing-by-press-secretary-jen-psaki-and-national-security-advisor-jake-sullivan/. Accessed April 7, 2022.