As economic sanctions began to put a stranglehold on the Russian economy, long lines formed at banks and ATMs as everyday people tried to pull cash from their bank accounts. A Russian economy expert from the Foreign Policy Research Institute called it “a full-fledged bank run.”
Economic sanctions serve as a powerful foreign policy tool for the US government. But could this ultimately backfire on the US?
Over the last several years, many countries have made a concerted effort to limit dependence on the US dollar. The economic warfare waged against Russia reveals exactly why.
The EU has announced it will create a special payment channel to circumvent US economic sanctions and facilitate trade with Iran.
Last month, German foreign minister Heiko Maas called for the creation of a new payments system independent of the United States. The announcement Monday sets that plan in motion.
With hyperinflation gripping Iran and sanctions strangling the economy, Iranians are beginning to turn to gold to make everyday transactions, most notably to pay their rent.
The Iranian rial has depreciated rapidly since the US announced its withdrawal from the 2015 nuclear deal and the reimposition of economic sanctions. After the US formally announced it was pulling out of the deal in May, the exchange rate peaked at around 45,000 rials to the dollar. But that official rate was only available to well-connected bankers, importers and businesses. Average Iranians were paying twice that. By July 29, money-exchangers in Tehran were charging around 100,000 rials for one dollar. Within 24 hours, it increased to 110,000 rials to the dollar.
A Russian lawmaker has suggested his country should develop a gold-backed cryptocurrency for payment of arms exports and other goods as a way to circumvent Western sanctions and limit his country’s dependence on the dollar-based global banking system.
Vladimir Gutenev serves as first deputy head of the economic policy committee at the State Duma – the Russian Parliament’s lower chamber. He suggested Russia should develop a gold-backed cryptocurrency as he called for a suspension of treaties with the US, including the non-proliferation of missile technologies agreement.