Financial weapons: When money becomes a weapon

We picture wars with tanks and planes. Today, part of them is fought with blocked transfers.

The starting point is the dollar. Most world trade and international debt is settled in this currency.

And almost every dollar payment passes, at some point, through an American bank. That is where the tap is.

The United States can forbid its banks from dealing with a country, a company or a person. That is a sanction.

And a foreign bank that helps get round these sanctions risks being cut off from the dollar in turn.

In two thousand fourteen, a large French bank paid eight point nine billion dollars in penalties, for payments made to sanctioned countries.

The message was heard everywhere: even outside the United States, you do not play games with the dollar.

Second weapon: SWIFT. A Belgian cooperative, created in nineteen seventy-three, that links more than eleven thousand financial institutions.

SWIFT does not move money. It carries the messages telling banks who must pay whom. Without messages, no more simple payments.

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In two thousand twelve, Iranian banks were cut off. The country's oil exports became very hard to get paid for.

In March two thousand twenty-two, after the invasion of Ukraine, seven Russian banks were excluded in turn.

Third weapon, the heaviest: freezing a central bank's reserves.

A central bank holds its reserves in foreign currencies, often deposited in other countries. It is its emergency savings.

In two thousand twenty-two, about three hundred billion dollars of Russian reserves were immobilised. Nearly half the total.

For the first time, a country of this size discovered that its savings, held by others, could be refused to it.

The twist: each time this weapon is used, it gives others a reason to protect themselves from it.

So begins the debate on de-dollarisation: reducing dependence on the dollar.

Rival messaging systems appear, in Russia and China. Trade is settled in other currencies.

And central banks are buying gold like never before: more than one thousand tonnes a year, three years running. Gold kept at home cannot be frozen.

But the numbers move slowly. The dollar still makes up a little under sixty per cent of world reserves, against over seventy around two thousand.

It is retreating, without being replaced. No other currency offers a market as deep, as liquid and as freely accessible.

The lesson goes beyond geopolitics: savings held by someone else always depend, a little, on that someone's goodwill.