NATO countries may not have sent troops into Ukraine, but they are attempting to inflict pain on Russia through economic controls. The most dramatic of these are financial sanctions. The Central Bank of Russia is facing sanctions with regard to foreign exchange and SWIFT will be denying service to numerous Russian banks. This means that the Russian financiers and the Central Bank of the Russian Federation will be isolated from the global financial system. Cut off from buyers, the assets side of the central bank’s balance sheet will decline in value.
Cutting Off Dollar Access
A central bank’s balance sheet is composed of assets and liabilities. Assets are, more or less, the promises for repayment held by the central bank. Usually, the central bank can sell these assets to interested buyers in order to access cash. At the moment, the central bank cannot sell these assets, so they are essentially worthless. As a result, the value of central bank liabilities currently exceeds the attainable value of its assets.