Russia declared war on Ukraine and invaded the country a week ago. The major updates after such action have thrown the NATO and UN off their feet. This war was unprecedented and nobody saw it coming. Many meetings were held to deflect the situation furthermore the UNSC held an emergency session of the UN General Assembly on Russia’s aggression against Ukraine. The resolution was adopted with 11 votes in favor of major sanctions against Russia to financially cripple the country from further advancing to a full-blown war on Ukraine.
The 15-nation Security Council met on Sunday afternoon and held the vote on the emergency special session of the 193-member General Assembly on Russia’s invasion of Ukraine.
As per the reports, U.S and EU have voted to impose heavy sanctions against Russia, however, India, U.A.E, and China have abstained from the vote. On Saturday’s announcement by the U.S, European allies, including Germany and France have drafted sanctions, “Restrictive economic measures” to increase costs on Russia for its invasion of Ukraine.
The Major Sanctions on Russia by the U.S, EU, and Switzerland
The invasion of Ukraine has immensely raised widespread risks on economic fallout from this war. The U.S and EU have responded back with further agreement on isolating Russia from the international financial system, the Western Allies have decided to block “specifically” Russian banks from the SWIFT transaction system and financial institutions used to validate the complete international payments.
President of the United States, Joe Biden, stated on Thursday that all sanctions imposed on Russia would target its largest financial institutions, and cease measures that will do more financial damage on Russia’s high-tech imports.
I just spoke with President Zelenskyy to discuss our continued support for Ukraine — including security assistance and humanitarian aid — as it defends itself against Russian aggression. We will hold Russia accountable, and our sanctions are already having a devastating impact. pic.twitter.com/9X9x07QbD0
— President Biden (@POTUS) March 1, 2022
The White House Reported,
“A full blocking and correspondent and payable-through account sanctions, and debt and equity restrictions, on institutions holding nearly 80 percent of Russian banking sector assets.”
The Biden administration also made it clear that,
“The scale of Putin’s aggression and the threat it poses to the international order require a resolute response, and we will continue imposing severe costs if he does not change course.”
The US acknowledged and applauded Canada, Australia, Japan, the European Union, and the United Kingdom for having to agree on taking “similar forceful” sanctions against Russia.
Russia’s stock market crumbled to its lowest level in over four and a half years on Thursday, and its currency, which is the Ruble, reached a record low, reported by Al Jazeera.
Sberbank of Russia’s stock price in London Market has fallen by 92%, plunges to 2 cents a share. pic.twitter.com/YCpDTHl6Fu
— Aleph א #IStandWithUkraine 🇺🇦 (@no_itsmyturn) March 2, 2022
The President of the European Commission, the European Union’s executive, Ursula von der Leyen, said in a statement to the media,
“We commit to ensuring that a certain number of Russian banks are removed from SWIFT. This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.”
Ursula von der Leyen outlined confidently that cutting Russian Banks off the system would cripple them from further continuing the war, and the EU would also effectively block Russian exports and imports.
“If Putin was seeking to divide the European Union, to weaken Nato and to break the national community, he has achieved exactly the opposite”
— BBC News (World) (@BBCWorld) March 1, 2022
As per the reports, they have also imposed restrictions on the Russian Central Bank’s ability to access and deploy the country’s reserved “war chest” of an estimated $630 billion in foreign exchange reserves.
Neutral Switzerland has also announced that they will adopt the European Union sanctions against Russians involved in Moscow’s invasion of Ukraine. As per the reports, they would freeze their assets, the government stated on Monday.
The Switzerland government stated,
“In view of Russia’s continuing military intervention in Ukraine, the Federal Council took the decision on February 28 to adopt the packages of sanctions imposed by the EU on February 23 and 25.”
“Switzerland reaffirms its solidarity with Ukraine and its people; it will be delivering relief and supplies for people who have fled to Poland,”
the government further stated, and will also be renewing its offer to mediate in the dispute.
Switzerland and Sweden were neutral even during World War II.
Today Switzerland is freezing Russian assets, and Sweden is sending 5000 anti-tank missiles to Ukraine.
Putin has united and awakened the free world — perhaps more than ever before.
— Tristan Snell (@TristanSnell) February 27, 2022
Will Russia be able to bear the cost of these sanctions against them?
In the Twitter thread posted by CulturalHusbandry, they dive into the possibilities and bring out key information on the consequences of these sanctions on Russia.
The tweet stated that China and Russia would ditch the dollar as their main source of foreign exchange transaction recognition. In 2015, it had 90% bilateral transactions conducted in dollars. And by Q1 in 2020, their bilateral transactions conducted in dollars were reduced to about 46%. The tweet outlined that “De-dollarization” would result in a De facto Alliance. They were also quick to point out that Russia-China has been reducing dollar transactions since 2014.
According to the tweet, traditionally the dollar has had three utmost advantages to other currencies, which is the ability to maintain the value of the dollar in the form of limited inflation and depreciation, the other point is the sheer size of the American domestic per capita income, and the US having economical markets that are deep-rooted, liquid and open-market.
The Economic sanctions imposed by the U.S and EU are a powerful method in general. But, when overused which it has been, those on the receiving end start to look for alternatives, a solution to curb the issue; basically to remove the sanction obstacle factor financially. It is clearly evident by the numbers, China made it sure to have a limited effect on Russia and so did the country otherwise as well.
The Tweet also pointed out,
“The western has lost limited inflation which is no longer relevant. While it may not yet be astronomical, it is at +40yr highs and no longer considered transient.
Secondly, the western economy has been sidestepped by China as their Domestic Economy which is now massive by all metric, and it still stands to affirm in the market.”
The Tweet continued to outline that China and Russia have an economic agreement in place that allows both the countries to gain access to other currencies without having to purchase them on the foreign exchange market, and they have been doing this since 2014 as reported earlier.
China-Russia will ditch dollar:
-In 2015 90% of their bilateral transactions were conducted in dollars.
-By Q1 2020 46% of their bilateral transactions were conducted in dollars.
-De-dollarization results in a Defacto Alliance.
-They’ve been doing this since 2014.
-WHEN not IF. pic.twitter.com/mnLmyhDDGE
— CulturalHusbandry (@APhilosophae) February 26, 2022
The Alternative Measures China-Russia would seek?
The Tweet thread post continued to explain further, that Chinese President Xi Jinping and Russian President Vladimir Putin have decided to settle all transactions amongst them in their native currency in 2019, and develop systems which are completely independent to SWIFT international currency transactions by conducting trade-in “Ruble” and “Yuan,” respectively.
The thread posted on Twitter outlined a major key point to all this that a very few have seemed to recognize that Russia has been rapidly accumulating yuan reserves at the expense of the dollar value in the early 2019s. The Russian Central Bank’s revealed that it had slashed its dollar holdings by $101 billion with over half of its existing dollar assets.
Furthermore, the largest by far beneficiaries of this move was the yuan, which saw its share of Russia’s foreign exchange reserves rapidly hike from 5% to a shocking 15% after the Central Bank invested nearly $44 billion into the Chinese currency. This move made by Russia resulted in acquiring 1/4 of the entire world’s yuan reserves.
As per the reports, Russia’s Sovereign wealth fund has had invested in yuan and Chinese State bonds to steadily ramp up the “de-dollarization.”
The Tweet further stated, this so-called pride the U.S blindly takes on “The US dollar will always be the world’s reserve currency,” has now been crushed and the reality is that the western cannot control this fantasy any longer in the international foreign exchange market.
What is the Alternative Method to “De-dollarization”?
As per the reports, the BRICS countries are said to be creating a “single payment system” which allows Brazil, Russia, India, China, and South Africa to use their own national currencies respectively as a direct basis of exchange for external payments. And this step has been regarded as a major movement towards de-dollarization.
This system will establish a common retail payment method and transactions between the member countries. The report also states that BRICS is planning on introducing a special cloud platform, which will efficiently connect their national payment systems. Basically, an online wallet will be developed with access to these payment systems and an application will also be introduced for smooth access and quick transactions in national currencies for these countries without the need to exchange in dollars.
As per the reports, the BRICS Pay contactless payment system will not duplicate the national payment systems of these counties, it will simply serve as a service for linking the credit or debit cards of the citizens of the five BRICS countries to online wallets, which would offer them the ability to pay using a smartphone.