The unprecedented scale of Western sanctions imposed on Russia has not just tested Moscow’s economic resilience—it has catalyzed significant shifts in the global financial landscape. As countries observe Russia’s financial isolation, many are reconsidering their exposure to a dollar-dominated system that can be weaponized against them, creating momentum toward a more fragmented international monetary order.
The Yuan’s Rising Profile in Global Trade
China has emerged as the primary beneficiary of Russia’s forced pivot away from Western financial systems, with the yuan gaining unprecedented traction in international commerce. The fundamental question of whether Russian sanctions are achieving their intended goals becomes more complex when examining these shifting currency dynamics.
The transformation in Russia’s currency usage has been dramatic, with yuan-denominated trade increasing from just 3% of Russia’s international settlements before the invasion to approximately 20% by the end of 2022, according to the European Bank for Reconstruction and Development. The Moscow Exchange has seen yuan trading volumes surpass dollar volumes for the first time in history, as reported by Al Jazeera, while Russia has accumulated significant yuan reserves as an alternative to dollars and euros, according to Politico.
This shift represents more than a temporary adaptation—it reflects a strategic reorientation of Russia’s financial infrastructure toward China and away from Western systems. As sanctions persist, this trend appears to be accelerating rather than abating, as noted by The New YorkTimes.
The yuan’s influence extends beyond just Russian trade. Saudi Arabia and China carried out their first oil transaction in yuan in September 2022, according to Reuters, while during a Gulf summit in Riyadh, President Xi Jinping explicitly called for oil trade in yuan, as reported by Reuters. Bangladesh’s central bank announced it would allow trade with China to be settled in yuan, as cited in Al Jazeera, and Iraq, a major oil supplier, announced in February 2022 it would allow trade with China to be settled in yuan for the first time, according to Al Jazeera.
These developments, while incremental, represent significant shifts in a global financial system that has been dominated by the dollar since the Bretton Woods agreements of 1944, as highlighted by Al Jazeera. The impact of sanctions on Russia has therefore extended far beyond its intended target, potentially reshaping global financial architecture in ways that may diminish Western economic leverage in the future.
Gold’s Re-emergence as a Sanctions-Resistant Asset
Another striking trend highlighting the complex question of why sanctions Russia policies have produced mixed results has been the renewed importance of gold as a financial backstop for countries concerned about potential Western sanctions.
The world’s central banks have dramatically increased gold purchases, with approximately 1,073 tonnes acquired in 2022, worth approximately $110.6 billion, according to the World Gold Council cited in The Conversation. China, already the world’s leading producer of gold, imported US$67.6 billion in gold in 2022, as reported by OEC data cited in The Conversation, while Russia’s central bank has been accumulating gold for years as a strategic hedge against sanctions, according to The New York Times.
These purchases reflect growing concerns about the reliability of traditional reserve assets in an era of geopolitical tension, as noted by Investopedia. Gold has also enabled sanction-targeted countries to conduct trade outside conventional financial channels. Venezuela reportedly sent gold bullion to Iran in exchange for technical assistance with oil production, according to BNN Bloomberg cited in The Conversation, while the UAE imported 96.4 tonnes of Russian gold in 2022, up 15 times from 2021 levels, as reported by Reuters. Russia pegged the ruble to gold in early 2022, with 5,000 rubles buying an ounce of gold, according to Bullion Exchanges.
As one analysis noted in The Conversation: “The plan was to shift the currency away from a pegged value and into the gold standard itself so the ruble would become a credible gold substitute at a fixed rate.” This innovative approach to sanctions resistance demonstrates the challenges facing Western financial pressure campaigns in a resource-rich world where valuable commodities can serve as alternative value transfer mechanisms.
The SWIFT Dilemma and Alternative Payment Systems
The exclusion of Russian banks from SWIFT has highlighted vulnerabilities in reliance on Western-controlled financial infrastructure. While heralded as a major component of EU sanctions Russia policies, SWIFT restrictions have proven less effective than anticipated.
Only 10 Russian banks were cut off from SWIFT, with many others retaining access, according to Politico. According to the Atlantic Council, “most of Russia’s regional and smaller banks, over 300, still have access to SWIFT,” as cited in Politico. Energy-related transactions were specifically exempted from SWIFT restrictions, creating a significant loophole that has allowed continued Russian energy exports, as reported by the senior Biden administration official quoted in Politico.
Tom Keatinge of RUSI Europe observed in Politico: “The fact that the shut out was not universal has left ample scope for Russian banks to continue to benefit from SWIFT messaging services.” This partial implementation reflects the competing priorities within Western policy circles—balancing the desire to pressure Russia against concerns about global energy market stability and potential economic blowback.
Russia and its partners have accelerated development of alternative systems. Russia’s System for Transfer of Financial Messages (SPFS) has expanded its reach, according to Global Times cited by Politico, China’s Cross-Border Interbank Payment System (CIPS) has seen increased usage, as noted by the Atlantic Council, and bilateral currency swap arrangements have proliferated between countries seeking to reduce dollar dependence, as reported by Al Jazeera.
While these systems remain limited compared to SWIFT’s global reach, they represent the first serious challenges to Western dominance of international payment infrastructure. The EU sanctions regime may have inadvertently accelerated the development of parallel financial systems that could reduce Western financial leverage in future geopolitical confrontations, according to analysis by GIS Reports.
Secondary Sanctions: The Next Frontier
As Russia has adapted to direct sanctions, Western powers have increasingly turned to secondary sanctions—penalties against third parties doing business with Russia. Recent reports suggest these measures may be gaining traction, with three of China’s four largest banks reportedly stopping acceptance of payments from Russian entities under sanctions, according to Business Insider.
Banks in Turkey and the UAE have begun limiting payments and closing accounts linked to Russia, as reported by Bloomberg and Moscow Times cited in Politico, while Greek shipping magnates facilitating Russian oil exports have begun reconsidering their involvement, according to Politico. Treasury Deputy Secretary Wally Adeyemo emphasized this approach in Politico: “More and more, we’re going directly to the Chinese private sector firms, and private sector firms in a number of these third countries, to make clear to them that they have a choice and that we’re ready to use our tools to go after them.”
However, secondary sanctions carry significant strategic risks. They may accelerate de-dollarization efforts by countries fearful of future targeting, as analyzed by Kim Donovan of the Atlantic Council cited in Politico, risk alienating important strategic partners needed for other geopolitical priorities, according to Politico, and could fragment the global economy into competing financial blocs, as suggested by GIS Reports. The evolution of international sanctionsthus represents a delicate balancing act between short-term pressure and long-term strategic interests.
The Future of Global Finance
The sanctions campaign against Russia represents a watershed moment in the evolution of global finance, with implications extending far beyond the current conflict. While the dollar’s dominance isn’t ending overnight, structural changes are underway. The dollar’s share of global foreign exchange reserves has declined from approximately 70% in 2000 to around 60% today, according to Al Jazeera, alternative financial channels are developing that reduce dependency on Western-controlled systems, as reported by Reuters, and resource-rich countries are reassessing vulnerability to potential financial sanctions, according to The New York Times.
Alicia García Herrero, senior fellow at the Brussels-based think tank Bruegel, observes in Al Jazeera: “We are clearly moving towards a more multilateral world as shown by the falling share of the US dollar in forex reserves.” Western policymakers face difficult questions about the long-term use of financial sanctions. Overuse of sanctions may accelerate the development of alternative financial infrastructure, as noted by The New York Times, the effectiveness of sanctions diminishes as targeted countries develop countermeasures, according to Responsible Statecraft, and current measures may be undermining long-term Western financial influence, as suggested by GIS Reports.
James Galbraith of the Institute for New Economic Thinking notes in Responsible Statecraft that most Western studies on sanctions begin with the assumption of Russian economic pain rather than objectively assessing actual outcomes—a framework that “forgoes the intellectual distance necessary to accurately pinpoint the roots of sanctions failure.”
Navigating a Transitional Financial Order
The Western sanctions campaign against Russia has accelerated trends that were already underway in the global financial system. While the dollar remains dominant and Western financial institutions continue to set the rules of global commerce, alternatives are developing more rapidly than before, according to analysis in The New York Times.
This suggests that we have entered a transitional period in global finance—one where the dollar-based system remains predominant but is increasingly challenged by emerging alternatives. For Western policymakers, this raises profound questions about the future efficacy of financial sanctions as a geopolitical tool and the long-term architecture of global finance, as explored in Responsible Statecraft.
As economist Eswar Prasad of Cornell University summarized the situation in The New York Times: “China has to a large extent blunted the pain” of sanctions through trade substitution. This pattern of adaptation and realignment, occurring across multiple countries and financial instruments, points toward a more fragmented and multipolar financial future—one in which Western financial dominance can no longer be taken for granted and where the effectiveness of Russian sanctions may continue to fall short of Western expectations.
