The sanctions on Russian economy may come with a longer-term cost for the Western countries.

 

"The West’s overwhelming control could, in the long run, encourage other nations to create alternative financial systems, perhaps by setting up their own banking networks or even backing away from reliance on the dollar to conduct international transactions.

 “I would liken them to very powerful antibiotics,” said Benn Steil, a senior fellow at the Council on Foreign Relations. “If they’re overprescribed, eventually the bacteria become resistant.”

Other countries, like Iran, North Korea and Venezuela, have experienced these sorts of financial penalties before, losing their access to SWIFT or to some of their foreign exchange reserves. But the array of restrictions has never been slapped on a country as large as Russia.

During congressional testimony this week, Jerome H. Powell, the Federal Reserve chair, was asked how easily he thought China and Russia could create an alternative service that could undermine the effectiveness of SWIFT sanctions in the future.

 “In the near term, that’s not something you could create overnight,” Mr. Powell said. “It’s really a question for the longer term.”

That long-run trend away from SWIFT may occur in any case, some economists said. China has already set up an alternative system, which Mr. Powell noted. In the future, the current network may be overtaken by new messaging systems and financial technology.

The dollar’s towering dominance in financial markets is of a different order. Over the years, economic officials have warned that such concentrated power sets up an unstable global order. And the more investment capital that zips around the globe, the more financial leverage the United States’ currency has.

There are other global reserve currencies, including the euro and the yen. But a ready alternative to dollar dominance has been hard to find, especially among countries that Russia works closely with.

“China’s a long way away from being ready to fulfill that,” said Adam Posen, president of the Peterson Institute for International Economics.

In some ways, Russia’s effort to break free from the dollar shows just how hard it is to get away from the world’s dominant currency.

Nearly half the country’s external debt is still in dollars, and households and companies continue to hold dollars, the Institute of International Finance pointed out. And while Russia and Europe have looked to settle trade between them in euros, the nation’s major export is oil — which tends to be settled in dollars.

“I think in the longer term, certainly U.S. rivals such as China and Russia will try to find workarounds,” Mr. Prasad, the Cornell professor, said. But “this cannot change on the dime.”"