CSM Leiden - Security from Below Assignment (Elective Crisis and Security Management MSc.)
Course
Security from Below (8921E027)
Institution
Universiteit Leiden (UL)
This is my assignment for the elective course Security from Below for the MSc. Crisis and Security Management. It was graded with an 8.0. I chose the effect of sanctions on the hegemony of the U.S. Dollar as my topic.
To allow you to obtain an even higher grade, I have added the feedback I receive...
Growing Challenge to the U.S. Dollar
Caused by Financial Sanctions
A case study of Russia since 2014
S1871595
S1871595@vuw.leidenuniv.nl
Crisis and Security Management MSc, Leiden University
Dr. J.M. Hoye
Security from Below
30-05-2023
4250 words
1
,Table of Contents
Introduction.................................................................................................................................................. 3
Data and Methods......................................................................................................................................... 6
Evidence and Arguments................................................................................................................................ 9
Conclusion and Limitations.......................................................................................................................... 14
, Introduction
In the realm of global power, the United States has long exerted its influence through targeted
sanctions, coercing adversaries into submission. In an article by Daniel Drezner (2015), the
notion is put forth that the dominant position of the U.S. Dollar as the global reserve currency
remains unchallenged, despite the extensive use of targeted financial sanctions by the United
States. Drezner contends that the apprehension surrounding a potential shift in financial
polarity is exaggerated. According to him, concerns about this global transformation are
overstated, as the U.S. Dollar's central role in the global financial market is stronger than ever.
Consequently, Drezner asserts that the use of targeted financial sanctions as a form of
statecraft does not undermine the hegemonic position of the Dollar. Additionally, he presents
evidence suggesting that dedollarization is not currently taking place and is unlikely to happen
shortly (pp. 761-762).
Srichander Ramaswamy (2022, pp. 27, 32) argues that because of financial sanctions
widely being imposed by the U.S., the global market is moving away from the U.S. Dollar.
After the 2022 invasion of Ukraine, the U.S. and its allies imposed targeted financial
sanctions aimed at wreaking havoc or ‘shock and awe’ amongst the political elite of Russia.
This effort was aimed at coercing Russia to cease its aggression against Ukraine. Ramaswamy
argues that such events have an eye-opening effect on a significant part of the global
community.
The arguments of Drezner on the one hand and Ramaswamy on the other hand
contradict. The respective authors have assessed the challenge to the hegemony of the Dollar
by the use of targeted sanctions differently. While Drezner downplays the consequences,
Ramaswamy identifies evidence to substantiate that these consequences are subverting the
Dollar. In these conflicting claims lies the puzzle this research aims to solve.
To analyse this contradiction, the following research question is identified: have
financial sanctions imposed on Russia because of the 2014 invasion of Ukraine had a
challenging effect on the hegemony of the U.S. Dollar in global capital markets? Ramaswamy
argues that the 2022 targeted sanctions have had a profound effect on the international stance
towards the U.S. Dollar. The conflict in Ukraine – and sanctions on Russia, however, already
rage since 2014. Therefore, targeted sanctions on Russia since 2014 are assessed in this study.
To assess the impact of financial sanctions on Russia since 2014 on the global
financial system, evidence of a turnaround towards the Dollar is presented. Peer-reviewed
articles are analysed to address dedollarization efforts since 2014. This research relies on
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