The U.S.’s weaponization of the financial system will make life difficult for Russia, but may backfire disastrously on the U.S. From David C. Hendrickson at theamericanconservative.com:
Biden didn’t have to take a blowtorch to the financial system in response to the Russian invasion of Ukraine. But he has done so.
The comprehensive sanctions the United States and the West have imposed on Russia take us into an entirely new world. The sanctions are multidimensional, but most important is the “freezing” of Russian foreign exchange reserves, what President Biden called Putin’s $630 billion war fund in his State of the Union. This action means that all previous economic contracts between Russia and the West are invalid. Biden’s figure was probablyoverstated by half, but the precise figure doesn’t matter. It’s the principle that counts.
The effective nullification of contracts is the Big Enchilada, an H-Bomb rather than an A-Bomb, a 50-megaton Weapon of Financial Destruction (WFD). Without bothering to announce it, the United States and its allies have thrown a wrench into the gears of important sectors of the world economy. They are badly underestimating the fallout. Remarkably, they did this against the backdrop of a worldwide crisis in supply chains. That is about to get a lot worse.
Among the cascading dominos: 30 percent of the world’s wheat exports are now cut off. Russia’s exports of fertilizers—18 percent of the potash market, 20 percent of ammonia exports—are off market. Energy prices have exploded. A suddenly bipartisan United States has imposed a (mostly symbolic) ban on Russian oil imports. The Biden administration has insisted that it doesn’t want to diminish world oil and gas supplies but, grosso modo, the effect of its sanctions point strongly in that direction.