> For the complete documentation index, see [llms.txt](https://laurence-wilse-samson.gitbook.io/textbooks/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://laurence-wilse-samson.gitbook.io/textbooks/economic-coercion/part-iii-tools-and-mechanisms/chapter_7.md). # Chapter 7: Financial Statecraft and Sanctions ## Learning Objectives After working through this chapter, you should be able to: * Separate "the dollar system" into the networks a coercer can deny (messaging, correspondent banking and dollar clearing, custody of reserves, the reserve asset, and insurance and shipping finance) and say who holds jurisdiction over each. * Reconstruct the legal mechanics of financial denial: IEEPA blocking and the SDN List, the 50 Percent Rule, correspondent-account sanctions, the secondary sanctions of CISADA, CAATSA, the Hong Kong Autonomy Act, and Executive Order 14114, the immobilization of central bank reserves and the REPO Act, the oil price cap, SWIFT disconnection under EU law, and the counter-instruments of China and the EU. * Explain why secondary sanctions cut leakage through third-country banks, and why the same tool spreads the penalty for staying on the incumbent network to parties that were never sanctioned. * Read CIPS, local-currency settlement, mBridge, gold, reserve diversification, and the digital yuan network by network, separating what the evidence shows from what the model expects. * Apply the Chapter 1 framework to the financial sanctions on Russia in 2022 and assess them against the five criteria. * Set out how Beijing, Brussels, and the larger states of the Global South read their exposure to the dollar system, why they adapt as they do, and whose costs count for them. ## Executive Summary Financial sanctions work through networks the target does not own and cannot easily replace. I argue that "the dollar system" is several such networks, each with its own holder, legal instrument, and tipping threshold, and that the model's network clock has to be read for each separately. The United States holds dollar clearing, which gives IEEPA blocking and the SDN List their reach. Europe holds messaging, since SWIFT is a Belgian cooperative under EU law, and much of the custody of reserves, at Euroclear. Secondary sanctions extend U.S. jurisdiction to third-country banks and are the coercer's main tool for cutting leakage; they also spread the penalty for using the incumbent network to banks that were never targets. The anchor case is the financial sanctions on Russia from February 2022: the freeze of about $300 billion of central bank reserves, the SWIFT disconnections, and the oil price cap. They imposed large costs and compelled nothing. They moved Russia's trade with China onto renminbi settlement and CIPS, and they persuaded central banks that were never sanctioned to buy gold. They did not move those central banks into renminbi: its share of reserves has fallen since 2022, and the dollar's share of SWIFT payments has risen. Adoption of alternatives has tipped inside a sanctioned bloc and nowhere else, and the test of whether it persists after the penalty ends has not been run. The Chinese, European, and Global South Perspective Boxes read the same events from the capitals that decide whether the alternatives spread. *** ## Opening Case: Iran, 2010–2015 In 2010 Congress passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), which threatened any foreign bank that handled significant transactions for designated Iranian institutions with the loss of its U.S. correspondent accounts. The National Defense Authorization Act for 2012 extended the threat to Iran's central bank, and in 2012 SWIFT disconnected Iranian banks after U.S. and European pressure. Almost every major bank outside Iran dropped its Iranian business. Oil exports fell from 2.5 million barrels a day to about 1 million, the rial lost roughly 60 percent of its value against the dollar, and inflation soared. Nephew (2017), writing as a practitioner, argues that these pressures contributed to Iran's decision to negotiate, and the Joint Comprehensive Plan of Action (JCPOA) of 2015 suspended the secondary sanctions in exchange for limits on Iran's nuclear program. The United States withdrew from the agreement in 2018 and reimposed the sanctions without European support. European firms left anyway. Total abandoned a $4.8 billion gas project because its U.S. assets, dollar debt, and American shareholders made the risk unacceptable, and Shell, Peugeot, Siemens, and Airbus withdrew despite the EU's updated Blocking Statute. INSTEX, the channel France, Germany, and the United Kingdom created in 2019 to keep humanitarian trade alive, processed almost nothing before its dissolution in 2023. Iran's oil exports fell below 0.4 million barrels a day by 2020 (EIA 2021), and the World Bank estimates that GDP fell 4.9 percent in 2018 and as much as 8.7 percent in 2019. China kept buying at a discount under covert arrangements, but even Chinese banks were constrained by their own need for dollar clearing. No Iranian bank needed a U.S. account for this to work. The coercer acted on the third-country banks through which Iran's payments ran, each of which valued dollar clearing more than its Iranian business. The first round had Europe's consent and the second did not, but the banks behaved the same way, because U.S. jurisdiction over clearing substituted for allied agreement. That is the chapter's argument in miniature: financial leverage sits in networks, the coercer's reach depends on who holds each one, and an alternative is worth only as much as the counterparties willing to use it. I take the model's terms in order, with the financial sanctions on Russia in 2022 as the anchor case. Chapter 9 compares the two Iranian rounds and takes up the Russia sanctions as a whole, including trade, export controls, and energy; I keep to the financial channel. *** ## Exposure: Five Networks, Not One Dollar System The model's exposure term is the coercer's share of the target's supply, times the fraction withheld, times the fraction that does not leak back through third countries (Appendix B, exercise 7): $$q = s,\tau,(1-\lambda).$$ In finance what is supplied is access: $$s$$ is the share of the target's payments, funding, or reserves that must pass through a network the coalition controls, $$\tau$$ the fraction of that access the measure blocks, and $$\lambda$$ the fraction that reaches the target anyway through third-country banks and other channels. Financial restrictions act on several networks at once (Chapter 1), each with a different holder and a different alternative. | Network | Incumbent | Who can deny it | Scale | | ----------------------------------------- | --------------------------------------------------------- | ------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | | Reserve asset | Dollar assets, above all Treasuries; the euro second | The issuing state | Dollar 56.92% of allocated reserves, euro 20.33%, renminbi 1.93% (2025Q3) | | Messaging | SWIFT, a Belgian cooperative | Belgium and the EU | 11,000+ institutions in 200+ countries; about 50 million messages a day | | Correspondent banking and dollar clearing | U.S. banks and the Federal Reserve | The United States | $14.3 trillion of dollar credit to non-bank borrowers outside the U.S. (end-2025); the dollar on one side of 89.2% of foreign-exchange trades (April 2025) | | Custody of reserves | Euroclear; central banks and custodians of issuing states | Belgium, the G7 | About $200 billion of Russia's roughly $300 billion of immobilized reserves at Euroclear | | Insurance and shipping finance | G7 and EU insurers, brokers, and shipping services | The G7 and the EU | The channel that enforces the oil price cap | *Sources: IMF COFER (December 19, 2025); SWIFT (2024 activity statistics); BIS (2026) and 2025 Triennial Survey; Chapter 9 for Euroclear.* ### Reserves and the Safe Asset U.S. financial power rests on structural advantages in the international monetary system, not simply on economic size. The dollar's role as dominant reserve currency (56.92% of global foreign exchange reserves in 2025Q3), payment currency (50.49% of global SWIFT payments by value in December 2025; 58.62% excluding euro-area internal payments), and safe haven asset creates network effects (IMF COFER, December 19, 2025; SWIFT RMB Tracker, January 2026) and path dependencies that competitors cannot easily replicate. The United States accounts for about 25 percent of world GDP and 11 percent of world trade (World Bank WDI). The euro's 20.33 percent of reserves exceeds the euro area's weight in world output; the renminbi's 1.93 percent is far below China's, for reasons the Networks section takes up; other currencies hold 20.82 percent. The Treasury market is the world's largest and most liquid government bond market and the benchmark risk-free rate, U.S. equity markets hold nearly half of world stock market capitalization (SIFMA 2025), and in a crisis money flows into Treasuries. That depth makes dollar reserves useful and places them within reach of U.S. law. Figure 7.1 shows the holdings that put foreign governments inside that reach. China's were $683.5 billion at the end of 2025, about half the 2013 peak of roughly $1.32 trillion, and since the March 2025 TIC release China has ranked behind both Japan and the United Kingdom. Beijing has spent a decade reducing this exposure. The deepest layer of the dollar system is not a payment network at all but a backstop. Mehrling (2011, 2022), building on Kindleberger's (1973) argument that the interwar collapse came from the absence of a lender of last resort for the world economy, describes the system as a hierarchy of promises to pay in dollars, at the top of which the Federal Reserve acts as dealer of last resort. Most dollar credit outside the United States is extended by banks that do not have accounts at the Fed, and in a panic they need dollars faster than they can earn them. In 2008 and again in March 2020 the Fed supplied them through swap lines with other central banks, standing since 2013 with five (the ECB, Bank of Japan, Bank of England, Swiss National Bank, and Bank of Canada) and opened temporarily to nine more in 2020, and through a repo facility for foreign official holders of Treasuries (FIMA). Which central banks get a line is a decision of the Federal Reserve, not a rule. For the model this is the largest exposure term of all, and the least visible: a country without a swap line faces dollar funding stress on its own, and nothing it builds in renminbi or gold insures against that.
Panel A: lines of Treasury holdings by China, Japan and the United Kingdom. Panel B: bars of the ten largest foreign holders.

Figure 7.1: Foreign holdings of U.S. Treasury securities. Panel A shows holdings of China, Japan and the United Kingdom over time; panel B ranks the ten largest holders. Years are biennial before 2024. Source: U.S. Treasury International Capital (TIC) data and Federal Reserve.

### Messaging: SWIFT SWIFT is not a payment system but a secure messaging network for payment instructions and securities transfers (SWIFT 2024 activity statistics). It is a cooperative owned by its member banks and incorporated in Belgium, so the authority that can disconnect a bank is the EU. Washington's influence runs through the dollar's half of SWIFT payment value, which needs U.S.-connected clearing, through members' interest in U.S. market access, and through European coordination; the 2006 disclosure that the Treasury had used SWIFT data for counterterrorism showed the panopticon effect of Chapter 1. Figure 7.2 records currency shares of SWIFT payments over the years in which de-dollarization has been most discussed. On the series SWIFT has published since 2023, the dollar's share rose rather than fell, and the renminbi peaked at 4.74 percent in December 2023 before receding to 2.73 percent in December 2025 (2.13 percent excluding euro-area internal payments). SWIFT changed its data collection, so comparisons with earlier years need care.
Panel A: lines of currency shares of SWIFT payments, with the dollar and euro leading. Panel B: line of the Chinese yuan's share.

Figure 7.2: Share of global payment value carried over SWIFT by currency (panel A) and the Chinese yuan's share alone (panel B), December print of each year. Source: SWIFT RMB Tracker and BIS.

Disconnection does not freeze assets, close correspondent accounts, or make payments unlawful, and a disconnected bank may send instructions by other means if counterparties and the law allow. The blocking and risk decisions that usually accompany it are what make other means impractical. ### Correspondent Banking and Dollar Clearing Most banks cannot settle international payments themselves. A small bank holds an account at a larger bank abroad, which holds one at a major U.S. bank, and a dollar payment between two foreign firms settles at the end of that chain on the books of a U.S. bank and ultimately the Federal Reserve. Every U.S. bank in the chain is bound by U.S. sanctions and visible to the Treasury. Dollar use runs well beyond U.S. trade. A share of world trade far larger than the U.S. share is invoiced in dollars, including trade with no U.S. party, and Gopinath et al. (2020) show that this dominant-currency pricing makes trade volumes everywhere respond to the dollar. Dollar credit to non-bank borrowers outside the United States reached $14.3 trillion at end-2025 (BIS 2026), so foreign governments, firms, and banks need dollar access to service debt, and a sanction that blocks it can force a default. The leverage is a bank's choice between dollar clearing, which is valuable, and a sanctioned customer, which is risky and usually small, and the choice cascades. After North Korea's nuclear tests of 2016–2017, Bank of China, China Construction Bank, and Agricultural Bank of China stopped opening accounts for North Koreans and began closing existing ones (CNBC 2017), leaving North Korea with cash couriers, shell companies, and cryptocurrency. The Chinese banks were not sanctioned; they were exposed. ### Custody, Insurance, and Shipping Finance Two further networks look like services rather than infrastructure. Central banks hold reserves as securities and deposits with foreign custodians and central banks of issue, so the states that host those claims can immobilize them without moving anything; about half of Russia's reserves were frozen where they sat, much of them at Euroclear (Chapter 9). And G7 and European firms dominate marine insurance, shipping finance, and brokering. Most seaborne oil trade relies on that insurance, and it is the network the oil price cap of December 2022 used. The five networks give different coalitions the chokepoint. Only the United States can deny dollar clearing; messaging and much of the custody of reserves sit in Europe, which is why the 2022 measures needed Brussels and Belgium as much as Washington; insurance and shipping finance need the G7 together. *** ## The Instruments: How Financial Denial Works in Law Every financial sanction is a legal act aimed at one or more of the five networks. The Office of Foreign Assets Control (OFAC) in the Treasury administers the U.S. programs with a staff of roughly 200 (Treasury's last official figure is "more than 200"), and its power comes less from its own enforcement than from the compliance it compels: every institution that touches U.S. finance screens its transactions against OFAC's lists. The statutes, cases, and Table of Authorities are in [Appendix C](/textbooks/economic-coercion/appendices/appendix_c_legal_spine.md), sections 1, 3, 5, and 7. | Instrument | Authority | Network it acts on | | ------------------------------- | -------------------------------------------------------------------------------------------------------- | ------------------------------ | | Blocking and the SDN List | IEEPA (50 U.S.C. § 1702) and program executive orders, such as E.O. 14024 (Russia, 2021) | Clearing, custody | | 50 Percent Rule | OFAC guidance | Clearing | | Sectoral restrictions | Program directives; SSI and NS-MBS Lists | Capital markets | | Correspondent-account sanctions | CISADA (2010); Russia directives under E.O. 14024; CAPTA List | Clearing | | Secondary sanctions | CISADA, NDAA for FY2012, ITRSHRA (2012), CAATSA (2017), Hong Kong Autonomy Act (2020), E.O. 14114 (2023) | Leakage ($$\lambda$$) | | Immobilizing and using reserves | IEEPA; Treasury prohibition of Feb. 28, 2022; REPO Act (2024); G7 ERA loans (2024) | Custody, reserve asset | | Oil price cap | G7 and EU decision (2022); U.S. services prohibition under IEEPA | Insurance and shipping finance | | SWIFT disconnection | Council Regulation (EU) 2022/345 | Messaging | | Counter-instruments | China: Anti-Foreign Sanctions Law, Blocking Rules, Unreliable Entity List. EU: Blocking Statute | The coalition and $$\lambda$$ | ### Blocking Under IEEPA and the SDN List The basic instrument is the block. IEEPA lets the President, after declaring a national emergency, freeze any property in which a foreign country or national has an interest and prohibit transactions with it (Appendix C, section 1). OFAC implements each program by designating persons on the Specially Designated Nationals and Blocked Persons List (SDN List). Designation takes effect on publication: U.S. persons must freeze the designee's property within U.S. jurisdiction, refuse its transactions, and report what they hold, and U.S. banks screen every payment against the list in real time. The SDN List passed 12,000 entries in 2026, roughly double the 6,000 or so of 2016, with a record 3,135 additions in 2024. The older Trading with the Enemy Act now covers only Cuba, under embargo since 1962. Programs range from comprehensive (Cuba; North Korea; Iran from 1979, partly suspended under the JCPOA and reimposed from 2018; Syria until June 30, 2025) to list-based programs against terrorists, proliferators, narcotics traffickers, cyber actors, and human-rights abusers. OFAC designates after interagency review, on an administrative record that may include classified material. The standard is a "reasonable basis to believe," well below a criminal one, with no prior notice. A designee seeking removal must show changed circumstances, OFAC has no statutory deadline to decide, and the courts have upheld the process for foreign designees in nearly every case (Appendix C, section 3). The line between calibrated and comprehensive measures is a policy dial: on October 22, 2025, OFAC moved Rosneft and Lukoil, together roughly half of Russia's crude output, from the sectoral regime to full blocking under Executive Order 14024 (U.S. Treasury 2025). ### The 50 Percent Rule and Sectoral Restrictions A list of names is easy to evade by creating new entities, and OFAC's answer is the 50 Percent Rule. {% hint style="info" %} **The 50% Rule Explained** OFAC's "50% Rule" is an anti-evasion mechanism. If a sanctioned entity owns 50% or more of a company, even one not explicitly listed on any sanctions list, that company is automatically sanctioned too. The rule applies to chains of ownership: if Sanctioned Company A owns 60% of Company B, and Company B owns 80% of Company C, then Company C is also sanctioned (even though it's two steps removed). Banks must trace ownership structures carefully, which is why compliance costs are so high. {% endhint %} Sectoral restrictions sit below full blocking. After 2014 the Russia program barred dealings in new debt and equity of named banks, energy firms, and defense companies (Sberbank, VTB, Gazprom, Rosneft, and Novatek among them), recorded on the Sectoral Sanctions Identifications (SSI) List. They deny capital markets while leaving trade open, which makes them cheaper for the coercer and easier to evade. Other non-SDN lists name sanctions evaders (FSE) and the targets of menu-based secondary sanctions (NS-MBS). ### Correspondent-Account Sanctions and CAPTA The instrument that acts most directly on dollar clearing forbids U.S. banks to open or maintain correspondent or payable-through accounts for a named foreign bank, which OFAC lists on the CAPTA List (Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions). The foreign bank keeps its assets and loses its route into dollar clearing. CISADA made this the standard penalty for foreign banks dealing with designated Iranian institutions, and on February 24, 2022, OFAC applied it to Sberbank under a directive issued under Executive Order 14024. The legal duty falls on U.S. banks; the target is a foreign bank's place in the network. ### Secondary Sanctions: CISADA, CAATSA, the HKAA, and E.O. 14114 **Secondary sanctions** threaten non-U.S. persons for dealings with a target that are lawful where they occur. Congress usually specifies the triggering transaction and the President picks from a menu of consequences, from correspondent-account sanctions to full blocking. "Significant transaction" is left vague on purpose, so that uncertainty induces wide compliance. In the model they are the coercer's tool for raising the cost of leakage: they act on $$\lambda$$, not on $$s$$. Iran is the paradigm: CISADA (2010), the NDAA for FY2012 (Iran's central bank and oil sales), and the Iran Threat Reduction and Syria Human Rights Act (ITRSHRA, 2012). As large banks dropped Iranian business, smaller banks lost their correspondents. Against major powers the record is weaker. The Countering America's Adversaries Through Sanctions Act (CAATSA, 2017) mandated secondary sanctions on significant transactions with Russia's defense and intelligence sectors (section 231) and on Russian export pipelines (section 232, aimed at Nord Stream 2). India's $5.4 billion S-400 purchase met its criteria and was never sanctioned. Turkey's led to sanctions on its defense procurement agency in 2020, a rare case of sanctioning a NATO ally, and to its removal from the F-35 program. The Nord Stream threat forced the pipelay firm Allseas out, but the Biden administration waived the sanctions to repair relations with Germany until the invasion. Under the Hong Kong Autonomy Act (HKAA, 2020) the Treasury designated eleven officials in August 2020, including Chief Executive Carrie Lam, and has sanctioned no foreign bank: the officials held few Western assets, sanctioning banks with Chinese official relationships would have touched most major global banks, and China had enacted counter-sanctions law. Executive Order 14114 (December 2023) amended the Russia program to authorize secondary sanctions on foreign financial institutions that conduct or facilitate significant transactions for Russia's military-industrial base. It aimed at the leakage channel that opened after 2022, banks in third countries processing payments for Russian imports of dual-use goods, and the Networks section asks what it does to the network clock. ### Enforcement, Penalties, and Licensing Civil penalties under IEEPA reach the greater of $377,700 per violation (the 2025 inflation-adjusted maximum, re-indexed each January) or twice the value of the transaction; willful violations carry up to $1 million and twenty years' imprisonment. Liability is strict, so a bank that processes a prohibited payment is liable whether or not it knew, and that is the system's force multiplier. The settlements make it largely self-enforcing: BNP Paribas paid $8.9 billion in 2014 for clearing payments for Cuban, Iranian, and Sudanese parties (U.S. Department of Justice), Société Générale about $1.3 billion in 2018, and Standard Chartered $1.1 billion and UniCredit $1.3 billion in 2019. Figure 7.3 shows how large OFAC's own settlements have been and how unevenly they fall across years: a few very large cases, most against banks, account for most of the money. Programs are added far more readily than they are retired, which is one reason off-ramps recur as a question in this chapter.
Two panels of OFAC enforcement data. A: bars for the 15 OFAC settlements of $150 million or more, 2009 to 2026, 11 of them with banks and led by Binance and BNP Paribas. B: annual totals of OFAC penalties and settlements, 2006 to 2026, concentrated in a few years with very large cases.

Figure 7.3: OFAC civil penalties and settlements, 2006–2026. Panel A shows every settlement of $150 million or more (11 of the 15 with banks). Panel B sums all penalties and settlements OFAC lists for each year; 2026 runs to October 27. Amounts are OFAC's own settlement figures. Combined resolutions that also involved the Justice Department, the Federal Reserve or state regulators were larger, so the totals quoted in the text for individual banks differ from the OFAC amounts shown here. Source: U.S. Treasury, Office of Foreign Assets Control, Civil Penalties and Enforcement Information (year pages, retrieved 28 October 2026).

OFAC manages exceptions by license: general licenses authorize categories of transactions without application (humanitarian aid, personal remittances, telecommunications, the wind-down of contracts), and specific licenses, about 2,000 applications a year, cover individual cases. ### Humanitarian Exceptions and De-Risking IEEPA exempts donations of food, clothing, and medicine and informational materials (50 U.S.C. § 1702(b)(2)–(3)), but the exemptions bind the government, not the banks. {% hint style="warning" %} **The De-Risking Problem** Banks over-comply with sanctions. The threat of billion-dollar fines (BNP Paribas paid $8.9 billion) makes banks risk-averse. Rather than carefully evaluate whether a transaction is permitted, many banks simply refuse all transactions with any connection to sanctioned countries. This "de-risking" behavior blocks legal humanitarian aid, prevents families from sending remittances, and makes it nearly impossible for NGOs to operate in sanctioned countries, even when their activities are explicitly permitted by law. {% endhint %} U.S. humanitarian exports to Iran fell sharply in 2017–2019 despite the exemptions, as they had under the secondary sanctions of 2012–2015 (Nephew 2017), and in 2020 Iran struggled to import medical equipment during the pandemic until the Treasury issued further guidance. NGOs fall back on cash couriers and hawala. In the model, over-compliance pushes leakage below what the law requires, and its cost falls on the groups with the least influence over the target's government. ### Sovereign Assets: Immobilization, the REPO Act, and ERA Loans On February 28, 2022, the Treasury prohibited U.S. persons from transactions with the Central Bank of Russia, the National Wealth Fund, and the Ministry of Finance, and the EU, the United Kingdom, Japan, and Canada acted in parallel (U.S. Treasury 2022). About $300 billion of reserves were immobilized where they were held. After *Dames & Moore v. Regan* (1981), little was expected from a challenge in U.S. courts (Appendix C, section 2). Immobilization is not confiscation, which most jurisdictions judged legally fraught. The REPO Act (Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, April 2024) gave the U.S. executive authority over Russian sovereign assets in U.S. jurisdiction, and in October 2024 the G7 agreed to lend Ukraine $50 billion through Extraordinary Revenue Acceleration (ERA) loans, serviced and repaid from the windfall interest on the immobilized assets, most of them at Euroclear; Washington disbursed its $20 billion tranche in December 2024 (G7 2024; U.S. Treasury 2024). For reserve managers in Beijing, Riyadh, or New Delhi the ERA mechanism is a sharper signal than the freeze: short of seizure, an issuing coalition can direct the earnings on another sovereign's reserves against that sovereign. ### The Oil Price Cap The price cap is a revenue sanction (Chapter 1). The G7 and the EU capped Russian crude at $60 a barrel from December 5, 2022, and refined products from February 2023. Western insurers, shippers, brokers, and financiers may service a cargo only if the oil was bought at or below the cap, and each party in the chain attests to the price; in the United States the cap is an exception to an IEEPA prohibition on services to the Russian oil trade. Russia's answer, a shadow fleet of several hundred aging tankers outside G7 services, carried most of its seaborne crude by 2023 (KSE Institute 2023). ### SWIFT Disconnection Under EU Law Because SWIFT is incorporated in Belgium, disconnection is an EU act. Council Regulation (EU) 2022/345 of March 1, 2022, prohibited specialized financial messaging services for seven listed Russian banks (VTB, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank, and the development bank VEB) from March 12 (Council of the European Union 2022); further measures added three Belarusian banks (Belagroprombank, Bank Dabrabyt, and the Development Bank of the Republic of Belarus) and, in the sixth package of June 2022, Sberbank. Iran's banks had been disconnected the same way in 2012 and after 2018. Access returns when a regulation lapses; the target's incentive to build an alternative may not. ### Counter-Instruments: China's Blocking Laws and the EU Blocking Statute China's **Anti-Foreign Sanctions Law** (反外国制裁法, June 2021) authorizes asset freezes, transaction bans, and denial of entry against foreign persons who implement "discriminatory restrictive measures" against China; MOFCOM's **Blocking Rules** (Order No. 1 of 2021) let the ministry prohibit compliance with specified foreign measures and give Chinese parties a damages remedy; and the **Unreliable Entity List** (2020) restricts foreign firms that cut off Chinese customers (Chapter 6). The EU **Blocking Statute** (1996, updated in August 2018) prohibits EU persons from complying with listed U.S. secondary sanctions, and the *Bank Melli* judgment (2021) made it a live constraint (Appendix C, section 5). None has changed a large bank's behavior, because a firm caught between OFAC's strict liability and its home state's prohibition has more to lose from the first. They matter more as signals of how a government reads its exposure, which the Perspective Boxes take up. *** ## Adaptation: Rerouting Payments Before Building Networks Chapter 1's first prediction is that rerouting comes before replacement. In finance the cheapest reroute is a different bank or currency on the same rails, and a target builds a network of its own last. ### Russia: SPFS, Yuan Settlement, and Third-Country Banks Russia began after 2014, when SWIFT exclusion was discussed and blocked by European resistance. The central bank built the System for Transfer of Financial Messages (SPFS) as a domestic substitute for SWIFT and diversified reserves toward gold, euros, and renminbi, with gold above 20 percent of reserves before the invasion (Chapter 9). The freeze showed which parts of the preparation worked: reserves held at home, gold above all, stayed usable, and claims on Western institutions did not. After 2022 trade with China shifted to renminbi and rubles, more than half of it, cleared increasingly through CIPS, and trade with India and the Gulf moved partly to rupees and dirhams (Chapter 9). Payments for restricted imports ran through banks in Kazakhstan, Turkey, the UAE, and China. The central bank's monetary gold stayed roughly flat through 2022–2024, with net drawdowns only from 2025 as budget and currency pressures mounted (World Gold Council; Bank of Russia). This is the fast, shallow adaptation of Chapter 1: new routes on existing rails, at a markup, with each third-country bank a point of leakage the coercer can try to close. ### Iran and North Korea: Barter, Discounts, and Crypto Iran sold oil to China at a discount, used barter and bilateral clearing, and made some sales in cryptocurrency. North Korea, with almost no bank access, relies on cash couriers, shell companies, and theft: the FBI attributed the roughly $1.5 billion Bybit theft of February 2025, the largest on record, to North Korea's "TraderTraitor" activity (FBI 2025; TRM Labs 2025). Cryptocurrency serves illicit actors and small transactions, not a state's reserves or trade at scale: prices swing by half, large conversions need exchanges that sanctions can reach, and transactions are traceable. Russia's use of it has been limited. ### China: Hedging Before Any Sanction China adapts in anticipation, the third prediction of Chapter 1. It cut its Treasury holdings (Figure 7.1), built CIPS from 2015, signed swap lines with more than 40 central banks over the years, 32 of them in force at the end of September 2025 for about 4.5 trillion yuan (PBOC), opened renminbi-priced commodity contracts such as Shanghai crude futures, and bought gold steadily, officially a single-digit share of reserves. The Chinese Perspective Box explains why Beijing hedges rather than exits. ### Stablecoins: The Incumbent Adapts Too Dollar-pegged stablecoins (USDT, USDC), the largest cryptocurrencies by volume, create digital dollars rather than alternatives. The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), signed in July 2025, requires issuers to hold reserves at least one-for-one in cash, deposits, short-term Treasuries, and other specified liquid assets, which may raise demand for U.S. government debt. Its Senate sponsor, Bill Hagerty, said it would "cement US dollar dominance" (Hagerty and Gillibrand 2025). I read the statute as a deliberate extension of the dollar network to a new substrate, the mirror image of the de-dollarization efforts below, and a live counterargument to forecasts of dollar decline (Chapter 10). *** ## Incidence: Who Pays for Financial Denial Financial sanctions can be aimed more precisely than tariffs, at named banks, firms, and individuals, and their costs still spread in ways the coercer does not control. **On the target.** The first costs of the Russia measures were large and fast (the anchor case gives them), but the government chose where the remaining foreign exchange went, and it sent it to the war economy and the groups that sustain it (Chapter 9). Ahn and Ludema (2020) find that Russian firms designated as strategic lost far less revenue and employment after the 2014 sanctions than comparable non-strategic firms, which implies that the state absorbed their losses. In Iran the costs of the 2018 round fell on the population through inflation and shortages of imported medicine, while elites kept access through the regime's own channels. In the model's terms, measured damage and politically weighted pressure diverged. **On third parties.** Over-compliance pushes costs onto people the law exempts: humanitarian organizations, families sending remittances, and importers of food and medicine. Secondary sanctions add the banks and firms of third countries, who bear the compliance cost and lose the business, and whose governments resent it. The Global South Perspective Box takes up how governments that were not targets count these costs. **On the coercer.** The direct costs to the United States are small. The cost that matters is deferred: each use of the dollar's centrality shows every reserve manager what dollar exposure can mean, a cost to the network itself. Allies bear a second cost (the European Perspective Box): those who hold the messaging and custody networks carry the legal risk of the measures, as Belgium does through Euroclear, and are overridden when Washington acts alone, as Europe was over Iran in 2018. *** ## Networks: The Network Clock in Finance The network clock asks whether adaptation accumulates into an alternative that outlasts the dispute. In Chapter 1's mechanism (Figure 1.6), third countries, not the target, decide adoption, since an alternative network is worth joining only if enough counterparties use it. A sanction adds a penalty for staying on the incumbent, which lowers the tipping share while it is in force and raises it again when it ends. Two tests follow: persistence, whether adoption survives once the penalty is lifted, and spread, whether it reaches beyond the parties that were sanctioned or feared they would be. A network used only by targets is a sanctions channel, not a rival system. Chapter 5 adds the distinction that matters here: a true network effect (an adoption externality) gives way only when enough users move together, while scale economies and switching costs can be overcome by a subsidized rival without coordination. | Network | What holds the incumbent in place | Alternatives | Evidence on adoption beyond sanctioned parties (to 2025–26) | Strength of evidence | | ----------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | | Messaging (SWIFT) | True network effect in a common message standard, plus banks' sunk integration | SPFS (Russia); CIPS messaging | SPFS has little international adoption; many CIPS payments still use SWIFT messages. No spread | Strong | | Correspondent banking and dollar clearing | Network effect in a vehicle currency: liquidity, dollar invoicing, $14.3 trillion of dollar debt abroad | CIPS settlement in renminbi; bilateral local-currency settlement; third-country banks | Renminbi 2.73% of SWIFT payments (December 2025), down from 4.74% (December 2023); about 25% of China's trade settled in renminbi; more than half of Russia–China trade in rubles and renminbi. Concentrated in trade with China and sanctioned parties | Moderate | | Reserve asset | Mostly scale, depth, and legal trust; liquidity rises with use | Renminbi, euro, other currencies, gold | Dollar 56.92% (2025Q3), down from 71% in 1999; renminbi 1.93%, down from a 2022 peak near 2.8%; record central bank gold purchases, 2022–2024 | Moderate | | Custody of reserves | Legal certainty and the depth of the markets reserves are invested in | Gold held at home; assets in friendly jurisdictions | Gold buying by central banks never sanctioned; no published series on where reserves are held | Thin | | Insurance and shipping finance | Scale, expertise, and acceptance by ports and regulators: switching costs, not network effects | Shadow fleet; non-Western insurers | Shadow fleet carried most of Russia's seaborne crude by 2023, serving sanctioned oil | Moderate | | Cross-border central bank money | None yet; the incumbent is correspondent banking | mBridge; e-CNY | Pilots among China, Hong Kong, Thailand, the UAE, and Saudi Arabia; volumes tiny | Thin; hypothesis | *Sources: SWIFT RMB Tracker; IMF COFER; BIS (2026); PBOC; World Gold Council; KSE Institute (2023); Chapters 9 and 10.* ### Messaging Messaging has the strongest adoption externality and the weakest alternatives: a bank joins SWIFT because every other bank is on it. Russia's SPFS carries domestic traffic and has drawn little international adoption (Chapter 10). This layer has not tipped, and I see no sign that it is close. ### China's Cross-Border Interbank Payment System (CIPS) CIPS, launched in 2015, clears and settles cross-border renminbi payments. By December 2025 it had 193 direct and 1,573 indirect participants in 124 countries and regions, with business reaching more than 5,000 banking institutions in 190 countries and regions. It processed about RMB 175 trillion in 2024, about $24 trillion at end-2024 exchange rates, or roughly $96 billion per trading day if divided by 250 days (People's Bank of China; CIPS 2025). That converts an annual total to a daily one and is not a share of SWIFT: SWIFT counts messages in all currencies, CIPS reports value settled in renminbi, and some CIPS payments travel on SWIFT messages (Appendix B, exercise 4). CIPS is a settlement network that settles only renminbi. Beijing controls it, so no outside government can disconnect a bank from it, but it offers no escape to anyone who needs dollars, and many participants are SWIFT members with U.S. exposure. Its growth measures the renminbi's use in cross-border payments, driven mainly by trade with China, and it tips only as far as that trade does. My hypothesis is that CIPS will keep growing with China's trade and sanctioned parties' business and will not draw third-country banks for payments unrelated to China. The test would be the share of CIPS value that neither starts nor ends in China or Russia, which CIPS does not publish. ### Renminbi Internationalization: Progress and Barriers The renminbi's reserve share rose from about 1 percent in 2016, when it entered the IMF's Special Drawing Rights basket, to a peak near 2.8 percent in 2022, and has since fallen to 1.93 percent (2025Q3). About 25 percent of China's trade was settled in renminbi in 2024, up from about 10 percent in 2015 (PBOC; SWIFT RMB Tracker). The barriers are Chinese policy choices. Capital controls limit foreign purchases of Chinese assets and residents' moving money abroad, and the exchange rate is managed. The onshore bond market, the world's second largest at about $23 trillion in 2024 (government bonds roughly $12–14 trillion), is more fragmented and less liquid than the Treasury market (AsianBondsOnline 2025), and foreigners hold under 10 percent of it, against 30–40 percent of Treasuries. The zero-COVID lockdowns of 2020–2022 and the crackdowns on technology, education, and gaming firms in 2021–2022 showed policy that can change without notice, which matters to a foreign holder at least as much as the Russia freeze does. The Chinese Perspective Box explains why Beijing accepts these limits. The fall in the renminbi's reserve share after 2022 is the most informative number here. The freeze gave reserve managers outside the coalition a reason to diversify, and on the model's logic it should have lowered the renminbi's tipping threshold. They diversified into gold instead. Liu (2026) argues that Beijing's aim is not to replace the dollar but to become "the Pepsi to the dollar's Coca-Cola," and that a respectable second place would be enough to end the dollar's effective monopoly over sanctions. Her proposed route runs through industry rather than finance: if China consolidates its hold on critical minerals, clean-energy equipment, and grid hardware, it can price those hard-to-substitute exports in renminbi, finance and insure them in renminbi, and then offer foreigners somewhere to reinvest the proceeds. She identifies the last step as the weakest link, since it requires a far larger pool of renminbi assets that foreigners can freely buy and sell. In the model's terms the green route raises the renminbi's adoption externality inside the trades China already dominates (Chapter 2), while the capital account sets the threshold beyond them. That is the same constraint the Chinese Perspective Box describes from Beijing's side. ### Reserves and Gold Gold is the one alternative whose adoption has clearly spread beyond sanctioned parties. Central bank purchases reached record levels in 2022–2024 (World Gold Council), and the buyers included central banks that expected no sanctions, since gold held at home cannot be frozen. But gold is not a network: it has no adoption externality, earns no yield, and cannot settle trade or service debt. Buying it lowers exposure to the custody network without building a rival to the dollar, so in the model it is insurance against $$\tau$$, not a step toward tipping. I read it as the clearest evidence of what the freeze taught third countries: to hold some reserves outside anyone's jurisdiction, not to move them into China's. ### Central Bank Digital Currencies (CBDCs) More than 100 countries, together over 95 percent of world GDP, are exploring central bank digital currencies (Atlantic Council CBDC Tracker 2024). China's e-CNY has run pilots since 2020 and had 261 million individual wallets by January 2022 (PBOC), though active use is far smaller; Russia, India, and the EU have pilots or projects of their own. The cross-border case is **mBridge**, a platform for settlement between central banks linking China, Hong Kong, Thailand, the UAE, and, from June 2024, Saudi Arabia. It shows technical feasibility at small scale. A CBDC changes the rails, not the currency: settlement between central banks could bypass correspondent banking and SWIFT, but a digital yuan is still subject to China's capital controls. My hypothesis is that mBridge, if it grows, will grow among parties that already trade in each other's currencies, as an extension of bilateral settlement, and that its spread will follow the renminbi's rather than lead it. ### BRICS Currency Proposals BRICS proposals range from linking payment systems (SPFS, CIPS, India's UPI), through a basket unit of account like the SDR, to a common currency, which would require members to give up monetary sovereignty. China dominates the group and a renminbi-centered system serves it, and India is wary of Chinese-led infrastructure. The 2025 Rio de Janeiro summit did not mention a common currency, partly because President Trump had threatened 100 percent tariffs on any BRICS country that backed a dollar alternative. The operative agenda is bilateral swap lines and local-currency settlement: many small networks, each with an adoption externality inside a pair and none beyond it. ### Secondary Sanctions and the Leakage Term Secondary sanctions are the coercer's tool for raising the cost of leakage: a third-country bank that handles a target's payments risks its own dollar clearing, so it drops the business, and $$\lambda$$ falls. The Iran campaign of 2010–2015 shows the tool at full strength, and Executive Order 14114 aimed it at the banks carrying Russia's import payments. The same act extends the penalty for staying on the incumbent from the target to the third-country bank. A bank that wants to keep a target's business now has a reason to move it onto rails the coercer cannot reach, which is the shove that lowers the tipping share in Figure 1.6, applied to parties that were not sanctioned. Secondary sanctions therefore close leakage on the incumbent network and widen the set of potential adopters of the alternative. A large bank with U.S. exposure drops the business; a small bank with none may specialize in it. My hypothesis is that secondary sanctions concentrate a target's payments in a few specialized banks outside U.S. reach, lowering leakage through the mainstream system while building a dedicated channel that persists. Testing it needs bank-level data on who processes Russian and Iranian payments, which I have not found in a published series. ### What Would Count as Tipping Under the penalty, adoption of alternatives rose where sanctioned parties and their main trading partner could coordinate: Russia–China trade moved onto rubles, renminbi, and CIPS, and Russian oil onto a shadow fleet. Outside that bloc there is no spread in messaging, clearing, or reserve currency, and the one alternative widely adopted by unsanctioned parties, gold, hedges the custody network rather than rivaling it. The Global South Perspective Box sets out why the third countries that decide adoption hedge rather than switch. The persistence test has not been run, because the Russia sanctions remain in force; when they end, the model says to watch whether Russia–China trade returns to dollar and euro settlement, whether the shadow fleet returns to Western insurers, and whether CIPS participants outside China and Russia keep using it. Appendix C notes that when sanctions are lifted, banks that have de-risked do not return automatically, and the Iran relief of 2016 is the nearest precedent. If that holds, the incumbent can lose a target's business for good without any alternative tipping. That hysteresis, exit from the incumbent without adoption of a rival, is in my judgment the likeliest long-run cost of financial sanctions: less dramatic than de-dollarization, and more certain. *** ## Anchor Case: The 2022 Financial Sanctions on Russia Read Through the Model Russia's full-scale invasion of Ukraine on February 24, 2022, brought the largest financial sanctions ever imposed on a G20 economy. I read only the financial channel here: the reserve freeze, the SWIFT disconnections, and the price cap. Chapter 9 treats the Russia sanctions as a whole, including export controls, energy, and rerouted trade. ### Timeline: Freeze, Disconnection, Cap, and Escalation | Date | Measure | What it did | | ------------------- | --------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | | 2014 | Sanctions after the annexation of Crimea | Sectoral debt and equity restrictions; SWIFT exclusion discussed and blocked by European resistance | | Aug. 2017 | CAATSA | Codifies the Russia sanctions; Congress gains a review over lifting them | | Apr. 2021 | E.O. 14024 | New Russia emergency; basis of later designations | | Feb. 24, 2022 | Invasion of Ukraine | U.S. correspondent-account sanctions on Sberbank; blocking of other large banks | | Feb. 26, 2022 | U.S., EU, UK, and Canada announce SWIFT exclusion and central bank measures | Coordinated package two days after the invasion | | Feb. 28, 2022 | Treasury prohibits transactions with the Central Bank of Russia | About $300 billion of reserves immobilized across the coalition | | Mar. 1 and 12, 2022 | Council Regulation (EU) 2022/345 | Seven Russian banks off SWIFT from March 12; Gazprombank and Sberbank spared | | June 2022 | EU sixth package | Sberbank disconnected | | Dec. 5, 2022 | Price cap on crude | $60 a barrel; caps on refined products from February 2023 | | Dec. 2023 | E.O. 14114 | Secondary sanctions on foreign banks serving Russia's military-industrial base | | Apr. 2024 | REPO Act | U.S. authority over Russian sovereign assets | | Oct.–Dec. 2024 | G7 ERA loans | $50 billion for Ukraine from proceeds of immobilized assets; U.S. $20 billion disbursed in December | | Oct. 22, 2025 | Rosneft and Lukoil designated | Coordinated with UK freezes (Oct. 15) and the EU's nineteenth package | ### Exposure Russia had prepared. After 2014 it built SPFS, cut its dollar holdings, paid down external debt, and accumulated about $630 billion in reserves with more than a fifth in gold. That lowered the coercer's share $$s$$ in the networks Russia could replace and left it high in the one it could not, custody: about half the reserves were claims on Western institutions, and the coalition froze them where they sat. Figure 7.4 shows where the frozen Russian assets were held.
Stacked bars of Russian assets frozen in 2022 by jurisdiction.

Figure 7.4: Russian central bank and other assets frozen after the invasion of Ukraine on 24 February 2022, by holder jurisdiction. Includes central bank reserves and assets of sanctioned oligarchs and state-owned entities; data as of Q4 2022. Sources: European Commission, U.S. Treasury, Bank of Russia, IMF and CSIS estimates.

The coalition's own exposure limited $$\tau$$. Europe bought Russian gas and paid through Russian banks, so the banks that cleared most energy payments were held back: Gazprombank throughout, and Sberbank, Russia's largest bank, until June 2022. The price cap had the same origin: a full embargo on Russian crude would have raised world oil prices, so the coalition taxed Russia's revenue rather than removing its supply. ### The Coercion Event On Chapter 1's four dimensions the measures were financial, aimed at the banking sector and the central bank, with elite designations of oligarchs and officials and a sectoral component in energy. Their objectives were mixed: punishment to press for withdrawal from Ukraine, deterrence of future aggression by Russia and others (China over Taiwan among them), and signaling of Western unity. Their intensity was Level 4, near-maximum financial pressure short of a full embargo, matched in severity only by the programs against Iran and North Korea. Within days the ruble fell about 30 percent and the stock market closed for weeks. French Finance Minister Bruno Le Maire said the West was "waging an all-out economic and financial war on Russia," a phrase he soon withdrew as incompatible with de-escalation (Le Maire 2022). ### Adaptation: What the Evidence Shows and What the Model Predicts | Model prediction (Chapter 1) | What the record shows | Status | | ------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | | A credible threat moves behavior before the measure | Reserve diversification, SPFS, and debt reduction from 2014; trade fell in goods at risk before sanctions (Egorov, Korovkin, Makarin, and Nigmatulina 2025) | Consistent | | Rerouting comes before replacement | Payments moved to renminbi, rubles, and banks in Kazakhstan, Turkey, the UAE, and China before any new network carried them | Consistent | | Volume recovers before damage | GDP fell about 1.2% in 2022 and grew from 2023; rerouting restored about two-thirds of lost import volumes while exposed firms' output fell about 12% (Egorov et al. 2025) | Consistent | | Evasion scales with the price wedge and meets rising costs | The shadow fleet grew as the cap bit and narrowed the discount (KSE Institute 2023; Chapter 9) | Consistent; leakage share not measured here | | Secondary sanctions lower leakage through third-country banks | E.O. 14114 aimed at banks carrying import payments | Untested here; no bank-level data | | Network adoption rises under the penalty | More than half of Russia–China trade in rubles and renminbi; CIPS use rose | Consistent, within the sanctioned bloc | | Adoption spreads beyond the sanctioned | Renminbi reserve share down since 2022; dollar SWIFT share up since 2023; gold bought widely | Not observed, except gold | | Adoption persists after the penalty | Sanctions in force | Untested | | Burden predicts holdout | Foreign exchange and inputs allocated to the war economy; war aims unchanged | Consistent | ### Incidence and Outcome Inflation reached about 17 percent, capital fled, and foreign investment stopped, but Rosstat's revised figure puts the 2022 contraction at only about 1.2 percent (its first estimate was 2.1 percent), and growth resumed in 2023 on war spending, high energy prices, and import substitution. The state directed foreign exchange and imported inputs to the war economy and the groups it depends on, and the costs that reached the population did not move a government insulated from them. Russia did not withdraw from Ukraine or change its aims; the claim that sanctions prevented escalation cannot be verified. On the coalition's side, European energy prices rose and fed inflation, Western firms lost their Russian business, and Belgium carried the legal exposure of the immobilized reserves. Allied unity held better than most predicted, and the measures tightened as Europe found other gas in 2022–2023, but the coalition was Western, not global. India, China, Turkey, and the Gulf stayed out and kept buying Russian oil, which set the leakage term. ### Networks: Did the Freeze Tip Anything? Narrowly, as the Networks section shows: the measures tipped Russia's payments with China onto non-dollar settlement and its oil onto a shadow fleet, adoptions by a sanctioned party and its main partner, and what spread beyond them was the hedge into gold. My hypothesis is that the Russia–China settlement channel will persist because it rests on trade that would continue without sanctions, that the shadow fleet will persist in part because it has been paid for, and that the renminbi's reserve role will not move much either way. ### Assessment Against the Framework | Criterion | Assessment | | ---------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Target compliance | Failed. Russia did not withdraw, end the war, or change its aims | | Capability degradation | Moderate and gradual. With export controls (Chapter 9), the measures raised the cost and lowered the quality of military production; the freeze removed about half the reserves built to withstand pressure | | Cost imposition | Severe at first: ruble down about 30% within days, inflation about 17%, markets closed for weeks; GDP down about 1.2% in 2022, then growth on war spending | | Sustainability | So far high. Energy exemptions narrowed as Europe diversified and the coalition escalated in 2025, while evasion through third countries and the shadow fleet eroded the bite | | Collateral damage | Significant. European energy costs and inflation; humanitarian costs in Russia; a demonstration to every reserve manager that reserves held abroad can be frozen | Judged by its stated aim, the campaign failed; judged as cost imposition, capability degradation, and a demonstration of resolve, it partly succeeded. That is what the model predicts for a large target with alternative partners, an insulated government, and time to prepare: pressure that is real in the aggregate, weighted lightly where decisions are made, and leaking through a wide residual market. ### Trajectories: The Taiwan Question Beijing reads the case as a rehearsal. The same measures might bite harder on China, which is more integrated into world finance, holds more than $3 trillion of reserves and large private dollar assets, and depends more on trade and foreign technology. They would also cost far more: U.S.–China goods trade reached $690.3 billion in 2022, against about $36 billion of U.S.–Russia trade in 2021 and $16 billion in 2022; China is a central node in world supply chains; Japan, South Korea, and the EU depend on it far more than on Russia; and China has prepared its alternatives more systematically than Russia did. Beijing drew two lessons that cut in different directions: Western financial coercion can be severe and fast, and a large economy can survive it if willing to pay. Whether the Russia sanctions deter aggression over Taiwan cannot be known; they have shaped China's preparation for it. *** ## European Perspective Box: Euro, INSTEX, and the Limits of Financial Autonomy *This box asks the model's questions from Brussels: how Europe reads its exposure to the dollar system, why it adapts as it does, whose costs count in its decisions, and what that means for a coercer that needs European networks. Chapter 6's box treats the Blocking Statute and the Anti-Coercion Instrument in trade; this one concerns money.* ### How Brussels Reads Its Exposure Europe is the one party in this chapter that both holds financial chokepoints and is a target of them. It holds messaging (SWIFT disconnects banks under EU law) and much of the custody of reserves (Euroclear holds most of Russia's immobilized reserves). It is exposed on dollar clearing as much as anyone. BNP Paribas's $8.9 billion settlement in 2014 showed what U.S. jurisdiction over clearing meant for a European bank, and in 2018 Total, Siemens, Airbus, and Daimler chose dollar access over Iranian sales while their governments protested. In 2022 Europe used its own networks against a major economy for the first time, disconnecting Russian banks from SWIFT under EU law and immobilizing reserves at Euroclear, and its exposure showed in what it held back: Gazprombank and, until June, Sberbank, because Europe's gas payments ran through them. The euro was meant to be the answer. Launched in 1999, it holds 20.33 percent of world reserves (2025Q3), a share that has barely moved in a decade. European firms trading outside the euro area usually use dollars, and in a crisis investors still buy Treasuries. The reasons are institutional: twenty members with separate fiscal positions; no common euro bond on the scale of Treasuries, so German Bunds serve as the safe asset in limited supply; nationally segmented banking; and a European Central Bank that has put domestic monetary policy ahead of the euro's international role. In the model's terms, the euro is a large incumbent in its own region and a weak alternative in the dollar's networks. ### Why Europe Adapts as It Does Europe's instinct is legal. The Blocking Statute forbids compliance with listed U.S. secondary sanctions, and after *Bank Melli* it binds European firms, but it has not changed a large firm's choice (Appendix C, section 5). INSTEX was designed to net trade with Iran without dollars or U.S. banks. It was restricted at first to humanitarian goods and never covered oil, Iran's main export; no large European firm used it for fear of losing U.S. market access; China and Russia declined to join; and Washington made clear that users could face sanctions. It was dissolved in 2023 having processed almost nothing. INSTEX is the clearest case in this book of an alternative network that failed the adoption test from the start: its value depended on large users, and the large users were the ones with the most to lose from the incumbent's penalty. The other adaptations are slower: a digital euro, presented partly as a way to reduce dependence on U.S. card networks; an Anti-Coercion Instrument whose countermeasures include limits on access to EU financial markets; and the 2023 Economic Security Strategy. ### Which Costs Count European decisions weigh member states with different exposures. Germany values the safe-haven status of its own debt and fears that a larger euro role would change it; France worries that a stronger euro would hurt its exporters; the euro area's periphery puts monetary stability ahead of international ambition. In sanctions, Belgium carries a cost no other member does, the legal and financial risk of holding most of the immobilized Russian reserves at Euroclear, a risk that weighed against outright seizure. Through 2026 European firms have feared OFAC's penalties more than their own governments' blocking rules, and European governments have protested extraterritoriality while complying with it. ### What This Means for the Coercer For Washington, Europe's consent is needed for messaging and custody and not for clearing. That asymmetry tempts unilateral action through clearing, as in 2018, and each such action strengthens the European case for autonomy, which would require unified fiscal capacity, deep capital markets, and a willingness to confront the dominant currency that Europe does not yet have. For Beijing the lesson is the reverse: Europe will not join an alternative to the dollar system, because its own firms are inside that system, but it will resist secondary sanctions aimed at its own banks. *** ## Chinese Perspective Box: Financial Sovereignty and Dollar Hegemony *This box asks the model's questions from Beijing's side: how China reads its exposure to the dollar system, why it hedges rather than exits, which costs its leadership counts, and what that implies for the coercer. Chapter 6's box treats the trade war and China's counter-sanctions law; this one concerns money and payments.* ### How Beijing Reads Its Exposure Chinese officials and scholars describe the dollar system in the language of power. **Financial hegemony** (金融霸权, jīnróng bàquán) names the use of the dollar's position for coercion: the "exorbitant privilege" to borrow cheaply and run deficits, the conversion of mutually beneficial integration into a weapon, and the extension of U.S. law to foreign parties. Foreign Ministry statements routinely condemn U.S. **long-arm jurisdiction** (长臂管辖, chángbì guǎnxiá) and **unilateral sanctions** (单边制裁, dānbiān zhìcái) as violations of international law and of sovereign equality. The law follows: the Anti-Foreign Sanctions Law and the Blocking Rules, whose title speaks of counteracting the unjustified extraterritorial application of foreign law (阻断外国法律与措施不当域外适用), treat secondary sanctions as exactly that (MOFCOM 2021; NPCSC 2021). The reading has a history. Chinese accounts recall foreign management of the Maritime Customs Service in the nineteenth century, whose revenues serviced foreign loans, and the People's Republic's exclusion from the Bretton Woods institutions after 1949. The lesson drawn is that foreign control of financial infrastructure is a political vulnerability. In March 2009, after the global financial crisis, the governor of the People's Bank of China, Zhou Xiaochuan, published an essay proposing that the IMF's Special Drawing Rights develop into a **super-sovereign reserve currency** (超主权储备货币, chāo zhǔquán chǔbèi huòbì), because a national currency serving as the world's reserve asset gave its issuer's domestic policy a claim on everyone else (Zhou 2009). The essay predates the weaponization debate, and the Russia freeze made its argument concrete. **Financial security** (金融安全, jīnróng ānquán) is the operative concept. It stands with military, food, and energy security as a component of national security in the comprehensive security framework, and it has four dimensions in Chinese usage: payment systems that do not depend on U.S. or Western infrastructure; reserves safe from freezing; control of cross-border capital flows; and a domestic system protected from external shocks. Measured on these, China's exposure in 2022 was large. It held more than $3 trillion of reserves, the world's largest, much of it in assets within Western jurisdiction; its banks depended on dollar clearing; and the 2017 episode in which its own large banks closed North Korean accounts showed that they would comply with U.S. sanctions to protect their access. The freeze of Russia's reserves, about $300 billion, removed any doubt that a central bank's reserves could be immobilized. ### Why China Hedges Rather Than Exits Beijing's response has been **hedged integration**: stay inside the dollar system while building enough outside it to survive a cutoff. It has kept large dollar reserves while diversifying into gold, euros, and renminbi assets, and cut its Treasury holdings to $683.5 billion by end-2025 (Figure 7.1). It stays in SWIFT while building CIPS. It opens selected markets to foreign capital through Bond Connect and Stock Connect while keeping capital controls. And it participates in the IMF and the BIS while supporting the AIIB and the New Development Bank. Three Chinese ideas explain why the hedge stops short of exit. The first is **dual circulation** (双循环, shuāng xúnhuán), the strategy set out in 2020 that makes the domestic economy the main body and engagement abroad the supplement (Liu He 2020). In finance it means deep domestic capital markets, renminbi-denominated trade and investment, domestic rating agencies and auditing standards, and **self-reliance** (自力更生, zìlì gēngshēng) in payment infrastructure. The second is **financial opening with Chinese characteristics** (有中国特色的金融开放), controlled liberalization that expands the renminbi's international use without full convertibility. The lesson Chinese policymakers draw from the Asian Financial Crisis of 1997–1998 is that premature opening of the capital account invites speculation and capital flight, so stability comes first. The third is the goal of building China into a **financial power** (金融强国, jīnróng qiángguó), which the Central Financial Work Conference of October 2023 adopted and which Xi Jinping has said requires, among other things, a strong currency. A strong currency in this usage means one widely used in trade, investment, and reserves; it does not mean a freely convertible one. Read through the model, the hedge is rational. The dollar's networks carry true adoption externalities that China cannot overcome alone, so exit would cost it the liquidity and markets its exporters and banks need. What China can do is reduce $$s$$ in the networks it can replace (holdings of Treasuries, settlement of its own trade in renminbi, a domestic payment system), and build CIPS and mBridge as settlement networks that are ready if a penalty falls. Each is designed to coexist with the incumbent, not to displace it. CIPS settles only renminbi and many of its payments still travel on SWIFT messages; the digital yuan remains subject to capital controls. That is what a hedge looks like when the alternative cannot tip by China's choice alone. ### Which Costs Count The leadership's priorities explain the renminbi's limited international role better than any market failure. Full internationalization would require an open capital account, a freely floating exchange rate, and legal institutions that foreign holders trust to protect their claims against the state. Each conflicts with the Party's control of the financial system, the exchange rate, and the economy. Faced with the choice, Beijing has put control first, and it accepts a small reserve share as the price. The costs the leadership counts are those that threaten stability: capital flight, a disorderly fall in the currency, a banking crisis. The costs it accepts are higher transaction costs for exporters, a smaller global role for the renminbi, and the slow pace of CIPS beyond China's own trade. Bottom-line thinking (底线思维, dǐxiàn sīwéi), Xi's phrase for planning against the worst case, applies here as it does in trade (Chapter 6): the preparation is for a Taiwan contingency in which the West applies the Russia measures to China. Chinese critiques of U.S. practice stress double standards: allies such as Israel, Saudi Arabia, and India avoid sanctions for conduct comparable to that of sanctioned states, and the United States goes unpunished for the Iraq War, drone strikes, and Guantánamo. Broad sanctions on Iran, Venezuela, and North Korea are described as economic warfare and collective punishment. Beijing presents its opposition to unilateral sanctions as a defense of multilateralism and the UN Charter, a position that resonates in the Global South. ### What This Means for the Coercer Four implications follow. First, China's hedging will continue whatever Washington does, because the Russia freeze confirmed the reading of exposure it rests on. Second, the hedge is built for a crisis, so its peacetime scale understates it: CIPS's capacity and China's gold matter most on the day after a cutoff. Third, China's own priorities cap the renminbi's role, so a coercer that fears renminbi displacement of the dollar is watching the wrong margin; the likelier outcome is a China-centered settlement network for China's trade and sanctioned parties, and more reserves in gold. Fourth, the legitimacy argument cuts both ways. Western critics answer that China's capital controls and record of intervention in its own markets would make the renminbi a riskier reserve than the dollar, and that its own informal coercion of Australia and Lithuania shows the same instruments in Beijing's hands. A coercer that understands why Beijing hedges rather than exits can at least predict where the hedge stops. *** ## Global South Perspective Box: Multi-Alignment, Financial Sovereignty, and the Sanctions Backlash *This box asks the model's questions from the third countries whose choices decide whether alternative networks spread: how they read their exposure to the dollar system, why they adapt as they do, whose costs count, and what that means for the coercer.* ### How the "New Neutrals" Read Their Exposure For the more than 100 countries that Bloomberg (2024) called "new neutrals," exposure to the dollar system is daily economic life: trade invoiced and debts owed in dollars, payments through SWIFT and U.S. correspondent banks, reserves in Western custody. The 2022 freeze turned a long-standing concern into a calculation: reserves held abroad are deposits subject to political decisions in the custodian's capital. India, with several hundred billion dollars of reserves held largely in Western institutions (Reserve Bank of India), drew the lesson at once, as did Saudi Arabia and Brazil. Most of these governments voted for the UN General Assembly resolutions condemning the invasion. What they reacted to was the demonstration of capability: frozen sovereign reserves, disconnected banks, private assets frozen by nationality, and secondary sanctions forcing third countries to choose. The strategy that follows is multi-alignment, heir to the Non-Aligned Movement born at Bandung in 1955 and founded in 1961 on the principle that new states should not be forced to choose sides. Heine (2025) calls its contemporary form **active non-alignment** (*no alineamiento activo*): engagement with all the major powers at once to maximize national advantage. India buys discounted Russian oil while deepening defense ties with Washington through the Quad. Brazil has a yuan swap line with China and is a Major Non-NATO Ally. Saudi Arabia was invited to join BRICS in 2023 without formalizing membership and hosts U.S. military facilities. Turkey, a NATO member, became the third-largest buyer of Russian fossil fuels while mediating the Black Sea Grain Initiative. Acharya (2014) calls the result a "multiplex world" in which middle powers refuse the binary choices great-power competition demands. ### Why They Adapt as They Do The adaptations are hedges chosen to lower exposure without leaving the incumbent. Central bank gold purchases reached record levels in 2022–2024 (World Gold Council). Swap lines have spread: Brazil and China signed a R$157 billion ($27.7 billion) swap in May 2025 (PBOC), and China and Saudi Arabia one of about RMB 50 billion ($6.98 billion) in November 2023, with talk of pricing oil in yuan but no confirmed yuan-denominated Saudi oil sale (S\&P Global 2024). A swap line's capacity is not evidence of trade settled in that currency, and India and Russia's turn to local currencies does not establish a rupee-ruble share without a currency-by-currency breakdown. Institutions are the second track. The New Development Bank, led since 2023 by the former Brazilian president Dilma Rousseff, had a portfolio of about $35 billion across 105 projects at the end of 2024, roughly a quarter in local currencies (NDB 2025). The Asian Infrastructure Investment Bank, with 110 members including major European states, approved $8.4 billion in 2024 and more than $60 billion cumulatively (AIIB 2025). Both are small beside the World Bank's lending of about $73 billion in FY2024, but they lend without the conditionality many governments experienced in IMF structural adjustment. BRICS is the political platform: it added Egypt, Ethiopia, Iran, the UAE, and Indonesia (January 2025), accepted nine partner countries at Kazan in October 2024, and covers about half the world's population and over 41 percent of world GDP at purchasing-power parity (IMF WEO 2024). Its communiqués call unilateral sanctions incompatible with the UN Charter, and its Cross-Border Payment Initiative and BRICS Clear proposals coordinate payment links, though its members disagree on almost every specific issue. None of these is a move to a rival system. Each lowers exposure in one network (custody, through gold; clearing, through bilateral settlement) while staying on the incumbent for everything else, which is how an agent below the tipping share behaves when it buys insurance against the penalty rather than expecting the alternative to become the standard. ### Which Costs Count The costs these governments count are those of being a third party. Secondary sanctions make their banks and firms choose between U.S. markets and lawful business with a target, on the decision of one executive branch, with no appeal for affected third parties. Broad programs on Iran, Cuba, North Korea, and Venezuela impose humanitarian costs on populations while elites keep access, which from these capitals looks like collective punishment of societies too weak to resist. And they point to selective enforcement: Russia's invasion drew the most comprehensive sanctions in history and Israel's operations in Gaza drew none; Iran faces financial exclusion over enrichment while nuclear-armed India and Pakistan face none. Whether the comparisons are sound matters less politically than that they erode the claim that sanctions express the will of "the international community." The constraints are as real: no alternative currency offers deep, open capital markets, and coordinated action needs trust that BRICS members lack. The dollar's reserve share has fallen from 71 percent in 1999 to about 57 percent, but toward the euro, smaller currencies, and gold, not one challenger. ### What This Means for the Coercer These governments decide whether alternative networks spread, so the network clock depends on their reading. Legitimacy erodes cumulatively: each action is judged by its effect on the countries whose compliance the coercer needs, not only on its target. Multi-alignment is a strategy, not fence-sitting, and demanding alignment through secondary sanctions may buy compliance now while building the hedges that reduce leverage later. Alternative institutions are individually small and cumulatively significant. Measures that are visibly targeted, time-limited, and carry working humanitarian exceptions would blunt the critics' strongest argument. What unites positions as different as India's hedging, Brazil's multilateralism, and Iran's opposition is the conviction that financial infrastructure should not be the instrument of a single power, and a willingness to buy insurance against it. *** ## Data Sources and Further Research **Reserves, payments, and markets.** The IMF's *Currency Composition of Official Foreign Exchange Reserves* (COFER, ) gives the currency shares of allocated reserves quarterly; the December 19, 2025 data brief is the source of the 2025Q3 shares quoted here. SWIFT's monthly *RMB Tracker* () gives currency shares of payment value, with and without euro-area internal payments, and SWIFT's annual activity statistics give message counts. The BIS publishes the Triennial Central Bank Survey of foreign-exchange turnover (April 2025) and its global liquidity indicators on dollar credit outside the United States (). The Treasury's TIC system () gives foreign holdings of Treasury securities by country. The People's Bank of China and CIPS Co. () publish CIPS participants and volumes, the World Gold Council central bank gold holdings and purchases, and the Atlantic Council's CBDC Tracker digital-currency projects. **Sanctions and enforcement.** OFAC () publishes the SDN List and the non-SDN lists (SSI, FSE, NS-MBS, CAPTA), each program's regulations and general licenses, and its civil penalties by year, the source of Figure 7.3. EU measures, including Regulation 2022/345, are on EUR-Lex; the EU, UK, Canadian, and Japanese sanctions authorities publish their own lists. G7 statements and Treasury press releases document the freeze, the price cap, and the ERA loans, and the KSE Institute's *Russian Oil Tracker* follows the cap and the shadow fleet. **Further reading.** Nephew (2017) on sanctions design from inside government; Zarate (2013) on how the Treasury built its financial tools; Mulder (2022) on the interwar origins of the economic weapon; Farrell and Newman (2019) on weaponized interdependence through network hubs; Drezner (2011) on targeted sanctions; Demarais (2022) on how sanctions push targets toward alternatives; Gelpern (2022) on law and money; Gopinath et al. (2020) on dominant-currency pricing; and Eichengreen, Mehl, and Chitu (2018) on how international currency dominance has been shared and has shifted. *** ## Key Insights * **"The dollar system" is five networks with different holders:** the United States holds dollar clearing; Europe holds messaging (SWIFT) and much of the custody of reserves (Euroclear); the G7 together hold insurance and shipping finance; and the dollar's 56.92 percent of reserves (2025Q3) rests on depth and legal trust. A target's exposure is a profile across these networks. * **Each network has its own legal instrument:** IEEPA blocking and the SDN List, the 50 Percent Rule, correspondent-account sanctions, reserve immobilization and the REPO Act, the price cap, and EU regulation for SWIFT. Disconnection is not a freeze, and a freeze is not confiscation. * **Secondary sanctions cut leakage and spread the penalty:** by threatening third-country banks with the loss of dollar clearing they shrink $$\lambda$$, and by the same act give those banks a reason to move a target's business onto rails the coercer cannot reach. * **The 2022 measures on Russia imposed large costs and compelled nothing:** the freeze removed about half the reserves Russia had built, and GDP fell about 1.2 percent in 2022 before war spending drove a rebound, while the state shielded the groups it depends on. * **Adoption of alternatives has tipped inside the sanctioned bloc and not beyond it:** Russia–China trade moved onto rubles, renminbi, and CIPS (RMB 175 trillion in 2024), but the renminbi's share of reserves fell from near 2.8 percent in 2022 to 1.93 percent, and the dollar's share of SWIFT payments rose after 2023. * **Gold is the hedge that spread, and it is not a network:** record central bank purchases in 2022–2024 lower exposure to the custody network without building a rival to the dollar. * **Beijing hedges rather than exits:** it cut its Treasury holdings to $683.5 billion and built CIPS to coexist with the dollar networks, while capital controls, which it values above a larger reserve role, cap the renminbi's spread. * **The likeliest long-run cost is hysteresis:** banks that de-risk do not return automatically when sanctions end, so the incumbent can lose a target's business without any alternative tipping. The persistence test of Figure 1.6 has not yet been run. ## Discussion Questions 1. Map a sanction of your choice onto the five networks in this chapter's exposure table. Which coalition holds each chokepoint the measure uses, and which network is the weakest link for the coercer? 2. Freezing $300 billion of Russian central bank reserves demonstrated great financial power and gave every reserve manager a reason to hedge. Was it strategically wise? Could measures that alarmed neutral central banks less have achieved the same pressure? 3. Secondary sanctions reduce leakage through third-country banks but extend the penalty for staying on the incumbent network to those banks. Under what conditions does the first effect dominate? What data would show which one is winning in the Russia case? 4. Using Figure 1.6, state what would have to be observed after the Russia sanctions end for the Russia–China settlement channel to count as a network that has tipped rather than a sanctions channel. Which of the alternatives in this chapter's network table is most likely to pass that test, and why? 5. The renminbi's share of reserves fell after 2022 while central bank gold purchases reached records. What does that pattern say about how third countries read their exposure, and what would have to change in China's policies for the pattern to reverse? 6. Financial sanctions can impose severe costs on civilians while elites keep access, and over-compliance blocks even licensed humanitarian trade. How should these costs constrain the design of financial sanctions, and how much do they matter for the countries whose compliance the coercer needs? *** > **Tabletop Exercise:** The tabletop exercise for this chapter — *Designing a Comprehensive Financial Sanctions Regime* — can be found in **Appendix A: Tabletop Exercises**. *** ## References and Further Reading Acharya, Amitav. 2014. *The End of American World Order*. Cambridge: Polity. Ahn, Daniel P., and Rodney D. Ludema. 2020. "The Sword and the Shield: The Economics of Targeted Sanctions." *European Economic Review* 130: 103587. Asian Infrastructure Investment Bank (AIIB). 2025. *AIIB Annual Report 2024*. Beijing: Asian Infrastructure Investment Bank. AsianBondsOnline (Asian Development Bank). 2025. "People's Republic of China: Market Summary." Local-currency bond market data. Bank for International Settlements. 2026. "Global Liquidity Indicators at End-December 2025." BIS Statistical Release, April. CNBC. 2017. "China's Biggest Banks Ban New North Korean Accounts." September 11. Council of the European Union. 2022. Council Regulation (EU) 2022/345, March 1. Restrictions on specialized financial messaging services to listed Russian banks. Cross-Border Interbank Payment System (CIPS Co., Ltd.). 2025. *CIPS Annual Report 2024* (annual business statistics). Shanghai: CIPS Co., Ltd. Demarais, Agathe. 2022. *Backfire: How Sanctions Reshape the World Against U.S. Interests*. Columbia University Press. Drezner, Daniel W. 2011. "Sanctions Sometimes Smart: Targeted Sanctions in Theory and Practice." *International Studies Review* 13, no. 1: 96-108. Egorov, Georgy, Vasily Korovkin, Alexey Makarin, and Dina Nigmatulina. 2025. "Trade Sanctions." Working paper (Barcelona School of Economics 1516; CEPR Discussion Paper 20601). Eichengreen, Barry, Arnaud Mehl, and Livia Chitu. 2018. *How Global Currencies Work: Past, Present, and Future*. Princeton University Press. Farrell, Henry, and Abraham L. Newman. 2019. "Weaponized Interdependence: How Global Economic Networks Shape State Coercion." *International Security* 44, no. 1: 42-79. Federal Bureau of Investigation. 2025. "North Korea Responsible for $1.5 Billion Bybit Hack." IC3 Public Service Announcement I-022625-PSA, February 26. Gelpern, Anna. 2022. "Money and Power in the World Economy." *Virginia Journal of International Law* 63, no. 1: 1-82. Gopinath, Gita, et al. 2020. "Dominant Currency Paradigm." *American Economic Review* 110, no. 3: 677-719. Group of Seven (G7). 2024. "G7 Leaders' Statement on Extraordinary Revenue Acceleration (ERA) Loans." October 25. Hagerty, Bill, and Kirsten Gillibrand. 2025. "Hagerty, Gillibrand Statement on GENIUS Act." Press release, May 16. Kindleberger, Charles P. 1973. *The World in Depression, 1929–1939*. Berkeley: University of California Press. KSE Institute (Kyiv School of Economics). *Russian Oil Tracker* and price-cap monitoring, produced with the Yermak–McFaul International Working Group on Russian Sanctions. Kyiv, 2023–. Le Maire, Bruno. 2022. Interview, France Info radio, March 1. Liu, Zongyuan Zoe. 2026. "The China Price: Beijing's Green Path to Ending Dollar Dominance." *Foreign Affairs*, October 20. Mehrling, Perry. 2011. *The New Lombard Street: How the Fed Became the Dealer of Last Resort*. Princeton, NJ: Princeton University Press. Mehrling, Perry. 2022. *Money and Empire: Charles P. Kindleberger and the Dollar System*. Cambridge: Cambridge University Press. Mulder, Nicholas. 2022. *The Economic Weapon: The Rise of Sanctions as a Tool of Modern War*. Yale University Press. Nephew, Richard. 2017. *The Art of Sanctions: A View from the Field*. Columbia University Press. New Development Bank (NDB). 2025. *Annual Report 2024*. Shanghai: New Development Bank. S\&P Global. 2024. "Saudi-China Ties and Renminbi-Based Oil Trade." Special Report, August. SIFMA. 2025. *2025 Capital Markets Fact Book*. Securities Industry and Financial Markets Association. TRM Labs. 2025. *The 2025 Crypto Crime Report.* TRM Labs. U.S. Congress. GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025), Pub. L. No. 119-27, signed July 18, 2025. U.S. Department of the Treasury. 2021. "Sanctions Review." October. U.S. Department of the Treasury. 2022. "Treasury Prohibits Transactions with Central Bank of Russia and Imposes Sanctions on Key Sources of Russia's Wealth." Press Release JY0612, February 28. U.S. Department of the Treasury. 2024. "Disbursement of $20 Billion Loan to Benefit Ukraine, To Be Repaid with Proceeds Earned from Immobilized Russian Sovereign Assets." Press Release, December. U.S. Department of the Treasury (OFAC). 2025. "Treasury Sanctions Major Russian Oil Companies, Calls on Moscow to Immediately Agree to Ceasefire." Press Release, October 22. U.S. Energy Information Administration (EIA). 2021. "Iran's Crude Oil Production Fell to an Almost 40-Year Low in 2020." *Today in Energy*. Zarate, Juan C. 2013. *Treasury's War: The Unleashing of a New Era of Financial Warfare*. Public Affairs. OFAC Sanctions Programs: ### Chinese-Language Sources (Selected) 周小川 (Zhou Xiaochuan). 2009. 《关于改革国际货币体系的思考》 \[Reform the International Monetary System]. People's Bank of China, March 23. 刘鹤 (Liu He). 2020. "加快构建以国内大循环为主体、国内国际双循环相互促进的新发展格局" \["Accelerating the Construction of a New Development Pattern with Domestic Circulation as the Main Body and Domestic and International Dual Circulation Promoting Each Other"]. *People's Daily*, November. 商务部 (Ministry of Commerce, MOFCOM). 2021. 《阻断外国法律与措施不当域外适用办法》 \[Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures]. Order No. 1 of 2021. Also 2020. 《不可靠实体清单规定》 \[Provisions on the Unreliable Entity List]. Order No. 4 of 2020. 全国人民代表大会常务委员会 (Standing Committee of the National People's Congress, NPCSC). 2021. 《中华人民共和国反外国制裁法》 \[Anti-Foreign Sanctions Law of the People's Republic of China]. June 10.