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Will Russia Sanctions Dethrone the ‘King Dollar’?


As tensions continue escalating between Russia and the West, the United States and its European allies have imposed economic sanctions on Russia. These sanctions have had varying degrees of success in achieving their intended objectives, but they have also raised questions about the potential impact on the global financial system. Most notably, market observers have begun to wonder if the sanctions might ultimately weaken the dominance of the US dollar, colloquially known as the “King Dollar.”

The US dollar’s reign

The US dollar has long been the world’s dominant reserve currency, providing stability and liquidity in the global financial system. It is estimated that around 60% of all foreign exchange reserves are held in US dollars, making it the primary medium for international trade and investment. Additionally, most commodities, such as oil and gold, are priced in US dollars, further solidifying their importance in global markets.

Russia’s countermeasures

Russia has reduced its reliance on the US dollar in response to the sanctions. The country has shifted a significant portion of its foreign exchange reserves into other currencies, such as the euro, the yuan, and gold. Additionally, it has pursued bilateral trade agreements with countries like China, India, and Turkey, allowing trade to be conducted in local currencies, bypassing the US dollar.

Implications for the US dollar

While Russia’s efforts to de-dollarize its economy may be seen as a direct challenge to the US dollar’s dominance, it is unlikely to dethrone the “King Dollar” in the short term. There are several reasons for this:

Inertia: The US dollar’s status as the world’s dominant reserve currency is deeply entrenched in the global financial system. Changing this would require a significant shift in market behaviour, which is unlikely to happen rapidly.

Alternatives: The euro and the yuan, the two most viable alternatives to the US dollar, have their challenges. The eurozone continues to grapple with economic and political issues, while the Chinese yuan is still relatively illiquid and subject to capital controls.

US economy and financial system: The US economy remains the largest and most advanced globally, and its financial system is the most developed and liquid. This creates a natural demand for US dollars in global markets.

Trust and stability: The US has a long history of maintaining a stable currency and a strong rule of law, which instills confidence in investors and market participants. This trust is essential for a reserve currency.


While the Russia sanctions have sparked discussions about the potential decline of the US dollar’s dominance, it is unlikely that these sanctions alone will dethrone the “King Dollar.” The global financial system is heavily dependent on the US dollar for stability and liquidity, and no immediate alternatives can match its strength.

The ongoing geopolitical tensions and the rise of alternative currencies and payment systems remind us that the US dollar’s position as the world’s dominant reserve currency is not guaranteed forever. As the global economy evolves, so will the landscape of reserve currencies. Whether these changes will ultimately lead to the dethroning of the US dollar remains to be seen.