The Costs of Russian Sanctions on US Citizens

Russian and U.S. state flags fly near a factory in Vsevolozhsk, Leningrad Region, Russia, on March 27, 2019. Anton Vaganov/Reuters

Commentary 

Like most readers of this newspaper, our wish for the Ukrainian people is for peace, prosperity, and self-determination. In an attempt to punish Russia for its invasion of Ukraine, the United States has put in place sanctions that are making life more difficult for many Russians and especially for its wealthy oligarchs. In a previous article, we wrote about the costs those sanctions would have on inflation in the United States and in particular about the additional costs for energy and food. In addition to increasing inflation, the U.S sanctions may also have the devastating impact of reducing the status of the dollar as the world’s primary reserve currency.

Why Preserving the Dollar as the World’s Reserve Currency Matters

Having the world’s reserve currency means that other countries hold dollars as a way to safeguard sovereign wealth. It means that many purchase agreements between other countries get priced in U.S. dollars. An example is the petrodollar, which refers to the worldwide practice of pricing oil in dollars even if the United States isn’t one of the parties involved in the sale. In addition, when traveling, I’ve found that many foreign businesses are just as happy or happier to get paid in dollars than their local currency.