The Biden administration’s threat to sanction US dollar transactions by Russian banks if the country invades Ukraine could set off a domestic financial crisis and even hasten the adoption of a central bank digital currency, a former International Monetary Fund official says.
Josh Lipsky, director of the Atlantic Council’s GeoEconomics Centre and a former adviser at the International Monetary Fund (IMF), said greenback sanctions on Russia would have far-reaching consequences.
Edward Fishman, a fellow at the Centre for a New American Security, and Chris Miller, an assistant professor at the Fletcher School at Tufts University, have noted that Russian banks such as Sberbank, VTB or Gazprombank would probably need to be bailed out by the government.
“Russia’s government would have to step in to bail out the bank and would struggle to prevent a domestic financial crisis,” they wrote in a piece for Politico.
“The rouble would fall sharply against the dollar. It would become riskier to hold dollars in Russian banks. Russian inflation would spike higher and real incomes would fall.”
Read the full story and more from The Australian Financial Review.