Empire by Extortion: Why Adam Tooze Gets Dollar Dominance Wrong

Deploying America’s financial superweapon against Russia may have signed the dollar’s death warrant

• Since the Cold War, America has weaponised the dollar and its payments system to impose economic sanctions on “unfriendly” countries.

• But the 2022 Russian reserve freeze marked a qualitative escalation that fundamentally altered global perceptions

• By March 2024, over half (52.9%) of Chinese payments were settled in yuan, marking a remarkable doubling in just five years. Dedollarisation is measurable, not theoretical

• The West’s decision to freeze Russian foreign exchange reserves has caused particular consternation in Chinese policy circles, with economist Yu Yongding calling it “a blatant breach of...trust”

• The more America abuses its position as the dominant player in the global financial system, the more those on the receiving end will seek workarounds or alternatives. Jack Lew’s warning proved prophetic

Picture the scene: March 2022, as Russian forces were surrounding Mariupol in Ukraine, Western financial warriors unleashed their ultimate weapon. With a few keystrokes, they froze $300 billion of Russian central bank reserves.

Nearly half of Russia’s estimated $640bn in foreign exchange and gold reserves vanished. No army had ever captured such treasure so swiftly or so simply.

Yet in that moment of supreme power, they may have signed the dollar’s death warrant.