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The Weaponization of Global Financial Public Goods and Its Formation Mechanism


Zhou Yu, a researcher at the Shanghai Academy of Social Sciences, suggests the U.S. will increasingly resort to financial sanctions to pursue its geopolitical goals. Frequent and large-scale deployment of sanctions, Zhou argues, will ultimately undermine their effectiveness by encouraging other states to reduce their dependence on global financial public goods controlled by the U.S., and by dampening enthusiasm for sanctions among other Western powers, which the U.S. relies on to make its actions effective.

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I. Introduction


Since Western countries led by the United States imposed financial sanctions on Russia on account of the Ukraine crisis in 2022, the issue of the weaponization of global public goods has frequently appeared in academic studies and media reports. In fact, long before the current crisis in Ukraine, the world had seen numerous U.S.-led financial sanctions, with Iraq, North Korea, Iran, and Russia among those subjected to such measures. Existing scholarship, however, has seldom discussed these sanctions in terms of the weaponization of global public goods: since those sanctions were relatively small in scale and the sanctioned countries had relatively limited influence, the sanctions did not pose a direct threat to global public goods and so researchers did not treat them as weaponization.


Since the current Ukraine crisis broke out, however, the situation has changed significantly. Western countries have not only taken advantage of global public goods to impose financial sanctions on an unprecedented scale on Russia, the world’s second-largest military power, but also threatened secondary financial sanctions against China, the world’s second-largest economy, pushing the weaponization of global public goods to new extremes—hence the widespread scholarly attention in China and abroad.1


In the current geopolitical context of the Russia-Ukraine conflict, the weaponization of global public goods means Western countries’ deployment of global financial public goods to impose financial sanctions on Russia. These sanctions include freezing or confiscating financial assets of Russian individuals and companies in Western countries, freezing the foreign exchange reserves and gold reserves of the Russian Central Bank, and restricting some Russian banks from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging system.2 The financial sanctions rely on such structures and tools as the international financial market, international capital market, and international monetary and settlement system. They have two things in common: first, they are all global financial public goods, and second, they are designed and operated mainly by Western countries. We can thus conclude that Western financial sanctions against Russia are essentially the weaponization of global financial public goods.3 As it is a “new” strategy, however, academia and the media have yet to agree on a single term for it; common names for this strategy also include the “weaponization of the dollar” and the “weaponization of finance.”4


Western countries’ ability to weaponize global public goods to impose financial sanctions on other countries is closely related to globalization. During the Cold War, Western countries and the socialist camp—their geopolitical rival—belonged to two separate economic systems. As non-Western countries had not yet become highly dependent on public goods provided by Western countries, the conditions did not exist for Western countries to weaponize global public goods. Instead, they would impose financial sanctions on hostile countries by prohibiting such adversaries from using their financial resources.


The advent of the era of globalization, however, has completely changed the situation described above. One consequential development in the world economy following globalization is that, while integrating into the Western-dominated financial system, countries around the world have become highly dependent on financial public goods provided by Western countries. This has created a favorable condition for Western countries to use global financial public goods to implement sanctions, and the U.S. government has indeed frequently done so since the start of the twenty-first century.


II. Discussion of the Weaponization of Global Financial Public Goods


The recent financial sanctions imposed by Western countries on Russia have triggered extensive discussion of the weaponization of global financial public goods in the international community. What follows is a review of three particular threads in the discussion.


First, a considerable number of studies argue that the weaponization of global financial public goods rests on deep globalization and that it is a new policy tool adopted by Western countries. As an analysis in the Financial Times points out, “this is a very new kind of war—the weaponization of the US dollar and other western currencies to punish their adversaries.” The article also emphasizes the relationship between globalization and the weaponization of the dollar: “Globalisation was once sold as a barrier to conflict, a web of dependencies that would bring former foes ever closer together. Instead, it has become a new battleground.”5


China’s foreign affairs experts and academics also pay close attention to the connection between globalization and the weaponization of global financial public goods. Le Yucheng, former vice minister at the Ministry of Foreign Affairs, points out that the West’s financial sanctions against Russia amount to a weaponization of globalization,6 a view that underscores the relationship between financial sanctions and globalization. Shi Donghui argues that “in a world where the global economy and finance are highly integrated, the dollar will inevitably become a weapon, and the U.S. government can exploit the global dominance of the dollar to expand the extraterritorial reach of U.S. law and policy.”7 Wu Xinbo sees the “weaponization of interdependence” and the “instrumentalization of international public goods” as new trends in the development of international relations.8


It is thus safe to say that deep globalization has enabled the weaponization of global financial public goods, that such weaponization is a new phenomenon, and that it is becoming a main political tool of the West in great power competition.


Second, some scholars believe that the weaponization of global financial public goods will have a negative impact on the future of the international monetary system. What Western countries have done will end up weakening the U.S. dollar system and enhancing the international status of the renminbi.


As Martin Wolf points out, currency is a public good for a country, and international currencies are a global public goods. By using the international monetary system to impose financial sanctions on Russia, Western countries have essentially weaponized international public goods, which will damage trust in dollar and euro assets and may cause some countries to break away from the Western-dominated international monetary system. The resulting fragmentation of the system may ultimately harm Western countries’ own interests.9 Gita Gopinath, first deputy managing director of the International Monetary Fund (IMF), also said that the United States’ weaponization of the dollar against geopolitical opponents threatens to fragment the international monetary system.10


Whether the Western financial sanctions against Russia will weaken the status of the U.S. dollar, however, is still open to debate among scholars. Martin Wolf and Gita Gopinath believe that this approach by the West will weaken the dollar. Barry Eichengreen, too, argues that the West’s financial sanctions against other countries would force those countries to adopt “de-dollarization” as a countermeasure, which would weaken the international status of the U.S. dollar.11 Michael P. Dooley and Megan Greene, meanwhile, have argued to the contrary.12 According to Dooley, as developing countries benefit economically from the dollar system, they are unlikely to exit the dollar bloc. Greene emphasizes that there is currently no international currency capable of replacing the U.S. dollar, whose supremacy will thus remain unchallenged.


These scholars have also discussed the impact of Western financial sanctions against Russia on the internationalization of the renminbi. Gopinath and Eichengreen believe that although the sanctions will help boost the international status of the renminbi, it cannot replace the dollar in the short term. Wolf considers it possible that in the long run, with the rise of China, the world may split into two monetary systems—a dollar one and a renminbi one. Dooley and Greene, on the other hand, do not think that the sanctions will have a significant impact on the internationalization of the renminbi. For Dooley, the dollar still holds a competitive edge over the renminbi, and in Greene’s view, despite the U.S. financial sanctions against Russia, the dollar is still safer than the renminbi as an international currency.


Third, some scholars have pointed out that the weaponization of global financial public goods may lead to a contraction in their supply and demand, thus adversely affecting the world economy. They compare the situation to the “Kindleberger Trap” and highlight the harm caused by the weaponization of global financial public goods.13


Drawing an analogy with similar historical situations, Lu Gang notes: “Whether it is a declining hegemonic superpower or not, the United States has become increasingly inclined to weaponize international public goods—for example, the U.S. dollar, which has become key to international finance and trade—against hostile states and sub-state actors in financial warfare. This is worse than interwar Britain’s inability—instead of unwillingness—to provide and maintain international public goods in Kindleberger’s account.”14 Here, Lu Gang implies that the weaponization of global financial public goods is more harmful than their absence. In fact, the two situations are effectively the same and have some common elements. The weaponization of global financial public goods will deter or restrict some countries from using them, which will eventually lead to a scarcity of those goods.


III. The Formation Mechanism of the Weaponization of Global Financial Public Goods


A prerequisite for the weaponization of global financial public goods is that sovereign states have assumed the responsibility of supplying them. Only then is it possible for a sovereign state to use its prerogative as the provider of global financial public goods to impose financial sanctions on other countries. That Western countries have such a prerogative is one of the objective conditions that allow them to weaponize global public goods.


In a sovereign state, the government is usually the provider and operator of public goods, but there is no global administrative body equivalent to a government in the international community, so the supply of global public goods is left in the hands of certain sovereign states. On the issue of who should provide global public goods, one influential view is Kindleberger’s hegemonic stability theory, according to which global public goods are usually provided by the hegemonic state, and the stability of the world economy hinges on whether or not the hegemon can provide sufficient global public goods.15 As the “Kindleberger Trap” points out, during the transition of hegemony, the established power is no longer able to meet the demand for global public goods, while the rising power does not yet have the ability and willingness to provide them. The resulting lack of global public goods gives rise to economic depression and war.


Although the hegemonic stability theory emphasizes the necessity of the hegemonic state to provide global public goods, it does not pay enough attention to the problems that may arise from such a system. After the end of World War II, the United States assumed the responsibility of providing global public goods, and the U.S. dollar thus became the world’s dominant international currency. When the national interests of the United States conflict with global public interests, however, the U.S. government will naturally put its own country’s interests first, which inevitably harms global public interests.


After the outbreak of the subprime mortgage crisis in 2007, the Federal Reserve adopted the policy of quantitative easing to stimulate domestic demand and encourage the depreciation of the dollar. A weaker dollar meant that the foreign exchange reserves denominated in dollars held by countries around the world were at risk of shrinking in value. This case exposes the inherent contradiction in the provision of global public goods by a sovereign state: as Hua Min puts it, “As the dollar is an international public good, the United States must maintain the stability of its value; however, as it is also a sovereign currency, the United States can change its value according to U.S. interests.”16


In view of the serious consequences caused by the subprime mortgage crisis, the UN commission of experts on reforms of the international financial system and Zhou Xiaochuan, the then governor of the People’s Bank of China, both proposed a super-sovereign reserve currency to replace the U.S. dollar,17 a proposal that immediately drew widespread attention in the international community, with many heads of government and well-known scholars joining in the discussion. It was against this background that the then French president Nicolas Sarkozy called for the inclusion of the renminbi in the Special Drawing Rights (SDR) currency basket, so as to reform and diversify the international monetary system.18 Discussions on the reform of the international monetary system during this period facilitated the IMF’s inclusion of the renminbi in the SDR basket. On December 1, 2015, the IMF officially announced that the renminbi would be added to the SDR currency basket on October 1, 2016, which marked the renminbi’s status as one of the most important international currencies, after the U.S. dollar, the euro, the British pound sterling, and the Japanese yen. In the long run, the rise of the renminbi as an international currency will have a profound and far-reaching impact on the diversification of the international monetary system.19


Although the U.S. subprime mortgage crisis has triggered discussions about the SDR as a supersovereign global financial public good, and although the international community has improved the structure of global financial public goods through institutional reforms, the main problems with those goods remain fundamentally unresolved. As a result, when the United States used its prerogative as the provider of global financial public goods to impose financial sanctions on Russia following the outbreak of the Ukrainian crisis in 2022, the international community once again questioned the rationality of the current global public goods system. Some academic and policy researchers argue that, in weaponizing global financial public goods, the United States has put its own interests above global public interests, which demonstrates the conflict between the interests of a sovereign state and global public interests. Compared with previous cases of such a conflict, furthermore, this instance shows some new characteristics.


First, it manifests in a different form. In the past, harm to global public goods was caused by the United States’ prioritization of its own interests when they were at odds with global public interests. This time, it is caused by the weaponization of global public goods to impose sanctions on other countries, which represents a new form of abuse of global public goods pioneered by the United States. In other words, the weaponization of global financial public goods is a new form in which the conflict between the interests of a sovereign state and global public interests manifests.


Second, the motivations behind the conflict are different. In the past, what the United States pursued were its own economic interests, and the conflict would usually arise in two ways. First, the United States would use its prerogative as the provider of an international currency to create dollars without restraint, which would result in the dollar’s depreciation and the fall in value of global foreign exchange reserves. Second, when the U.S. economic cycle was out of sync with the global economic cycle, the U.S. government would adopt economic policies that would benefit the United States but would harm the world economy. Unlike the purely economically driven motives before, however, this time the United States also uses global financial public goods as a tool to pursue geopolitical interests, imposing financial sanctions on other countries to advance its own political interests.


Third, the actors are different. The United States acted alone in previous instances of the conflict between national interests and global public interests, from which other Western countries suffered as well. In contrast, the weaponization of global financial public goods is a collective action, jointly implemented by the United States and other Western countries. The United States leads, and other Western countries follow. The conflict is now one between the interests of a group of sovereign states and the global public interests.


Another prerequisite for the weaponization of global financial public goods is the high degree of global financial integration driven by financial globalization. Only when the sanctioned country is highly integrated into the global financial system can financial sanctions have a deterrent effect. In other words, only when the sanctioned country is highly dependent on global financial public goods can such goods become an effective weapon for sanctions.


In discussing the weaponization of global financial public goods, it is worth asking why it was only after the beginning of the twenty-first century that Western countries started to frequently use global public goods for financial sanctions. The United States already had the prerogative to provide global public goods after World War II, and its ability to provide global financial public goods peaked in the early postwar decades, but the United States did not regularly weaponize global financial public goods against hostile countries during that period. In the twenty-first century, however, Western countries—led by the United States—began to frequently use their prerogative as the providers of global financial public goods to impose financial sanctions on other countries. From the Iraq War and the Iranian nuclear dispute to the Crimean crisis and the conflict between Russia and Ukraine, financial sanctions have become Western countries’ main weapon for undermining their rivals.


Why did the weaponization of global financial public goods become popular in the twenty-first century and not earlier? To answer this question, it is useful to think about the relationship between the weaponization of global financial public goods and financial globalization. In the 1960s and 1970s, when financial globalization had not yet materialized, the financial markets of Western countries and non-Western countries were separate from each other, and non-Western countries’ reliance on global public goods was still very limited. In this context, using global financial public goods to impose financial sanctions on non-Western countries would have produced very little deterrent effect. The advent of the era of financial globalization, however, has transformed this situation. While financial globalization has brought new economic opportunities to developing countries, it has simultaneously increased their dependence on global financial public goods, which has set the scene for the effective weaponization of such goods.


An important contributing factor in financial globalization is capital account liberalization.20 Although the international community established a free trade system after World War II, it did not result in financial globalization, which was hindered by capital account controls then in place globally. As competitive devaluations were seen to have played a significant role in bringing about World War II, the postwar reconstruction of the international monetary system adopted a fixed exchange rate system in which the currencies of all countries were pegged to the U.S. dollar.21 In view of the “impossible trinity,” if each country was to maintain an independent monetary policy while keeping a fixed exchange rate, then global capital account controls would be unavoidable. Therefore, before the collapse of the Bretton Woods system, the IMF endorsed government controls on capital accounts, and national governments had no choice but to implement capital account controls so as to maintain the independence of monetary policy. Global capital account controls became the main obstacle to financial globalization at the time.


The end of the Bretton Woods system ushered in an era of floating exchange rates, and with no need to maintain a fixed exchange rate system, capital account controls were no longer necessary. Countries around the world began to liberalize capital accounts one after another, laying the institutional foundations for financial globalization. During this period, global capital account liberalization was characterized by twofold competition—both between developing countries and between developed countries. On the one hand, to obtain more foreign investment, governments of developing countries engaged in competitive liberalization of capital accounts. On the other hand, developed countries competed to accelerate capital account liberalization, so that their enterprises could draw on the low labor costs in developing countries to gain a competitive edge.22 This twofold capital account liberalization brought about two important changes. First, since Western countries could provide a mature international financial market, developing countries began to use it for investment and capital raising, which led to a high degree of global financial integration. Second, the twofold capital account liberalization enabled multinational companies to transfer their production bases to developing countries with low labor costs, contributing to the close integration of industrial chains between Western countries and developing countries.


However, global financial integration as a result of financial globalization has also made it easy for Western countries to use global financial public goods as a tool to contain rival countries. Developing countries deposit their foreign exchange earnings from exports as currency investment in financial institutions and markets in Western countries, which makes it possible for Western countries to freeze or even confiscate these assets. In addition, developing countries often use the currencies and payment systems of Western countries for international settlement, which allows Western countries to disrupt their industry chains by cutting them off from the international settlement network.


Clearly, financial globalization is a double-edged sword. It has brought economic opportunities to developing countries, but it has also exposed them to financial sanctions by Western countries. China is no exception. Although financial globalization has boosted its economic development, its high reliance on global financial public goods means that the country is likely to face an extremely unfavorable situation if sanctioned by the West.23


A third prerequisite for the weaponization of global financial public goods is the actors’ monopoly over their supply. If a sovereign state could only partially provide a type of global public good, it would be difficult to weaponize it to sanction political rivals, as the sanctioned state can turn to alternative providers, and the sanctioning state may lose its original share in supplying the public good. On the other hand, as Pei Changhong notes, if a global public good is provided only by the United States, then this public good becomes a monopoly.24


A monopoly of global financial public goods will lead to global market failure. The weaponization of those public goods is not a market-driven decision, but a manifestation of global market failure. Unlike in Pei Changhong’s scenario, however, the U.S. dollar is not the only international currency, and the United States does not have a monopoly on international currencies. This limits the United States’ ability to unilaterally impose financial sanctions: imposing unilateral sanctions on Russia, for example, would prompt it to use the euro instead for international trade settlements, which would render the sanctions ineffectual. Therefore, to avoid this outcome, the United States has to try to team up with other Western countries to monopolize global financial public goods, so that the weaponization of them could produce a full deterrent effect.25


Fig. 1 Currency shares of global foreign exchange reserves and international payments (data from the end of 2021)


Source: created by the author based on data from the IMF database and Wind economic database

A currency’s shares of global foreign reserves and international payments are two important measures of how internationalized a currency is, and the U.S. dollar accounted for 58.8 percent and 40.5 percent of them respectively at the end of 2021, as shown in Figure 1. As the United States does not enjoy a monopoly on international currencies, it lacks the ability to unilaterally impose effective financial sanctions.


In fact, after the Crimean crisis, the United States already restricted some Russian banks from using the dollar for settlement, a move that forced Russia to adopt a strategy of “de-dollarization” and substantially increase its holdings of euro and renminbi assets. As Figure 2 illustrates, the U.S. dollar accounted for 46.3 percent of Russia’s international reserves in mid-2017, but by the end of 2021, its proportion had dropped to 10.9 percent—not only lower than the euro’s share, but also lower than that of the renminbi, which surged from 0.1 to 17.1 percent over the same period. In addition, the share of gold rose from 16.1 to 21.5 percent, the share of the euro rose from 25.1 to 33.9 percent, and the share of other currencies rose from 12.4 to 16.6 percent. Since the dollar does not enjoy a monopoly, U.S. attempts to impose unilateral financial sanctions on Russia would not only fail to have their desired effect, but may allow other international currencies to eat away at the dollar’s share in Russia’s international currency reserve basket.


Fig. 2 Changes in the composition of Russia’s foreign reserves


Source: created by the author based on data from the Russian Central Bank database

Having learned the above lesson, the U.S. government used the language of “political correctness” to induce other Western countries to take sides and jointly participate in financial sanctions against Russia after the Ukrainian crisis had erupted, so as to maximize the impact of the weaponization of global financial public goods. With an eye to ensuring their energy supply, EU countries at first opposed kicking Russia out of the SWIFT financial information exchange system and restricting its ability to make international transactions. Eventually, however, at the insistence of the United States, the United Kingdom, and some Baltic states, EU countries had no choice but to agree to the decision to impose SWIFT sanctions on some Russian banks.26


By persuading the European Union to participate in financial sanctions, the United States has increased the control it and its allies have over international currencies and decimated Russia’s ability to use global financial public goods for foreign economic activities.27 The currencies of Western countries almost completely dominate foreign exchange reserves and international payments, making up 97.2 and 97.3 percent of them respectively.28


In retrospect, Russia misjudged the position of EU countries to some extent. Given that the European Union was highly dependent on its energy supply, Russia had always believed that it would not agree to the SWIFT sanctions or freeze its foreign assets, taking the precaution of reducing its dollar holdings and increasing its euro holdings. However, the principle of putting “political correctness” first compelled EU countries to join in the U.S.-led financial sanctions in the end.29


IV. Characteristics and Implications of the Weaponization of Global Financial Public Goods


The weaponization of global financial public goods would not have been put into action had there not been a motivation to do so. Clearly, it was political rather than economic interests that drove such decisions and actions, which were economically damaging to Western countries. Trust is the foundation of commerce, and the loss of public trust inevitably hurts the economy.


Remarks of U.S. policymakers may help us understand the United States’ motivation for weaponizing global financial public goods. On June 2, 2014, the Center for Strategic and International Studies and the U.S. Department of the Treasury cohosted a symposium titled “The Evolution of Treasury’s National Security Role.” In his keynote speech, the then U.S. treasury secretary Jacob Lew noted that the weaponization of finance [wording in the Chinese text; in the actual speech this part reads “TFI,” referring to the Office of Terrorism and Financial Intelligence] “has opened up a new battlefield for the United States, one that enables us to go after those who wish us harm without putting our troops in harm’s way or using lethal force.”30 Similarly, in a speech in Warsaw at the end of March 2022, U.S. President Joe Biden stressed that “these economic sanctions are a new kind of economic statecraft with the power to inflict damage that rivals military might,” and that the measures were “sapping Russian strength, its ability to replenish its military, and its ability to project power.”31


These remarks suggest two characteristics of the weaponization of global financial public goods. First, in terms of its trajectory of development, it is a new phenomenon, a brand-new policy tool, and a new form of warfare launched by the United States. It gradually took shape over the past 20 years, and the Ukrainian crisis has brought it to the forefront of the world stage. Second, in terms of its place in politics, it will become a regular means by which the U.S. government undermines competitors and hostile countries, serving as an extension of and alternative to military warfare. The change from military warfare to financial warfare is not an accident or a one-time expedient, but a systematic strategic reorientation and trend.


Three factors contributed to Western countries’ preference for weaponizing global financial public goods against geopolitical rivals in the twenty-first century.


First, compared with a hot war, a financial war comes with a relatively low political cost and is more palatable to the people of the United States, hence the U.S. government’s increasing preference for routinely weaponizing global financial public goods against geopolitical rivals. In order to win over voters, the United States’ two major political parties have to choose a form of war that the people can tolerate. This is the main reason why the U.S. government has proceeded with the weaponization of global financial public goods. As a Financial Times analysis notes: “It is an approach to conflict two decades in the making. As voters in the US have tired of military interventions and the so-called ‘endless wars,’ financial warfare has partly filled the gap. In the absence of an obvious military or diplomatic option, sanctions—and increasingly financial sanctions—have become the national security policy of choice.”32


Second, the growing dependence of countries around the world on global public goods has increased the motivation of the West to weaponize global financial public goods. As mentioned above, globalization has greatly amplified the damaging impact of the weaponization of global financial public goods, providing favorable conditions for Western sanctions—a fact that enhances the West’s willingness to use global public goods to undermine geopolitical rivals.


Third, among various measures of economic sanctions, Western countries favor financial sanctions in particular, because they usually achieve more with less. As countries mostly use global public goods provided by the West for financial transactions, the weaponization of such goods can affect all international economic exchanges, including those between non-Western countries and sanctioned countries. This situation has increased the deterrent and destructive power of the weaponization of global financial public goods.33 Of the current Western financial sanctions on Russia, the SWIFT sanctions—rightly dubbed “a financial nuclear bomb”—dealt the greatest blow. An important feature of the SWIFT sanctions is that, if fully implemented, they would disrupt economic ties not only between Western countries and Russia, but also between all other countries and Russia, because almost all international payment settlements in the world currently go through the SWIFT messaging system. Although the renminbi cross-border payment system established by China is equipped with an alternative messaging system, China’s cross-border renminbi transactions still mainly go through SWIFT as it is the primary communications channel used by other financial institutions around the world.


Furthermore, Western countries’ freezing or confiscation of the sanctioned countries’ foreign exchange reserves and foreign assets obstructs economic activities not only between Western countries and the sanctioned countries, but also between other countries and the sanctioned countries. Since the currencies of Western countries account for as much as 97 percent of global foreign exchange reserves and international payments, the sanctioned countries can no longer use dollars or euros to pay non-Western countries for goods and debts once their foreign assets are frozen.


The above has analyzed the motivation behind Western countries’ weaponization of global financial public goods from three angles. However, current Western sanctions against Russia have exposed another problem: in a globalized world, the more powerful such weaponization is, the more severely it will backfire on the actors.34 This risk will act as a constraint on Western countries. Having imposed sanctions on Russia, the European Union is facing an energy crisis, and Western countries in general are facing problems such as rising energy prices and rapid inflation. In the long run, the negative impact on European countries participating in the financial sanctions may eventually dampen their enthusiasm for continued involvement. The international status of the U.S. dollar may also weaken as a result of the financial sanctions, which may temper the United States’ willingness to impose more.


V. Concluding Remarks


The weaponization of global financial public goods has become Western countries’ main tool to attack geopolitical rivals. However, they cannot wield it forever, as the weaponization will undermine the conditions that make sanctions effective and thereby weaken a sanctioning state’s ability to damage its rivals. Once a weapon is no longer effective, it will inevitably lose its value.


To be specific, a necessary condition for Western countries to use global financial public goods to impose sanctions is a sanctioned state’s high dependence on these public goods. Therefore, if more and more countries turn away from global financial public goods provided by the West out of fear of such sanctions, Western countries will lose its ability to impose such sanctions on other countries, and there will no longer be any reason for them to weaponize global financial public goods.


In fact, since Western countries imposed financial sanctions on Russia, some countries have adopted “de-dollarization” and “de-euroization” as their strategies on foreign exchange reserves and international payments. Both strategies essentially aim to reduce dependence on global financial public goods provided by the West. The faster this process advances, the sooner the weaponization of global public goods will exit from the stage of history. Moreover, the trends of de-dollarization and de-euroization will themselves have a deterrent effect on Western countries, which may just be enough to stop them from weaponizing global financial public goods.


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Cite This Page

周宇 (Zhou Yu). "The Weaponization of Global Financial Public Goods and Its Formation Mechanism [全球金融公共品的武器化及其形成机制]". CSIS Interpret: China, original work published in Journal of International Relations [国际关系研究 ], August 28, 2022

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