The Dollar System as Foreign Policy Tool
Correspondent banking, SWIFT, dollar clearing, and the structural reasons sanctions enforcement runs through New York
On February 26, 2022 — two days after Russian forces crossed the Ukrainian border at multiple points — the European Union, the United Kingdom, the United States, and Canada announced jointly that selected Russian banks would be disconnected from the SWIFT financial-messaging network. The announcement was reported in headlines around the world as 'Russia kicked out of SWIFT' and was widely treated as the most consequential financial-sanctions step taken since 1945. The reality is more nuanced and is worth getting right, because it is the cleanest contemporary illustration of the difference between two pieces of the global dollar system that are routinely confused.
The SWIFT disconnection — which took effect for seven specifically named Russian banks on March 12, 2022, and was subsequently extended to additional institutions — removed those banks from a Belgian-cooperative messaging network used to communicate payment instructions internationally.
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 7 sections and ends with 6 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1Correspondent banking — how a non-U.S. bank actually moves dollars
- 2Why no large-scale alternative to the dollar system has emerged despite four decades of incentive
- 3The dollar's structural shares — what the data actually says
- 4The U.S. dollar's structural shares in global finance (recent data)
- 5February 26 - March 12, 2022 — what 'cutting Russia off' actually meant
- 6Where to see this on the platform
- 7Summary