Finance

“Finance is used as a weapon against Russia; it must also be a shield to protect Ukrainians”

Professor of economics at the University of Paris-I Panthéon-Sorbonne, Olena Havrylchyk is a specialist in fintech, new financial technologies. Of Ukrainian origin, she believes that cryptocurrencies do not allow circumventing Western sanctions adopted against Russia, and that the European Central Bank should consider supporting the currency of Ukraine.

Russia is under severe economic sanctions. Have we ever, partially or entirely, disconnected a country from the international financial system?

In response to Russia’s invasion of Ukraine [le 24 février], the G7 countries have “weaponized” finance in an unprecedented way against a country of this size and this level of integration into the global economy. In recent history, only reserves in Afghanistan, Iran and Venezuela have been frozen. Prior to Russia, Iran was also the only country disconnected from the Swift financial network.

The European Union’s dependence on Russian energies nevertheless explains the difficulty of imposing an embargo on gas and oil from Moscow, which limits the strength of the European response. This also explains why Swift’s exclusion of part of the banking sector shows many exceptions, to allow payment for Russian gas. History, especially the Iranian example, nevertheless suggests that financial sanctions can still be tightened.

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Can these sanctions help to end the war?

According to Nicholas Mulder, historian at Cornell University [dans l’Etat de New York], it’s unlikely. In his book The economic weapon: the rise of sanctions as a tool of modern warfare (Yale University Press, 448 pages, 37.90 euros), he demonstrates that, despite the famine caused by the sanctions during the First World War, it was the demoralization of the armies, much more than the lack of economic resources, which was decisive.

In the XXand century, only three of nineteen attempts to use economic sanctions to prevent war succeeded. The United States’ monetary attack on the pound sterling, for example, put an end to the United Kingdom’s military expedition during the Suez Canal crisis in 1956. But the United Kingdom is a democracy, so that Putin is a dictator, who controls all media and even bans the use of the word “war” in his country.

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What will be the consequences of these measures on the Russian economy?

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