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Say, India wants to buy weapons from Russia, Russia is under American sanctions, and America doesn't want this deal to happen so it says the transaction, as long as it's in dollars, won't be authorized by America. How is it possible?

I mean if I have dollars and I want to buy something as long as the seller is happy with being paid in dollars, setting the issue of legality of using a currency that is not legal tender aside for the moment, no one can stop this deal. Certainly not America, if I'm not America.

What exactly changes when you advance to high-end deals? Can't India simply wire the needed amount of dollars to Russia? Or even move it physically, in bags?

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Relatively small sums can be paid in cash and it is difficult to prevent this, but large sums have to go through USA banks. Non USA banks may claim to have US Dollar accounts, but what they have in effect is local currency accounts quoted in US Dollars. When somebody in India sends Dollars to someone in Russia, what happens is that the bank in India wires their correspondent bank in the USA to transfer the Dollars to the Russian bank's correspondent bank in the USA, and when the Russian bank receives notice that they had beeen credited they can credit their customer.

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    "but what they have in effect is local currency accounts quoted in US Dollars": do you have a source to back that up? Or the assertion that such a transaction must be effected through correspondent banks in the US? – phoog Nov 25 '18 at 21:43
  • No. But note that my answer was just a rough outline, the banking system is much more complex. – Jonathan Rosenne Nov 26 '18 at 3:57
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    Could you recommend anything to read on the subject that goes into details of how the international banking system works? A book, perhaps. I've tried wiki, but it's spread over myriads of articles which are not easily patched together. Thanks. – user75619 Nov 26 '18 at 7:35
  • I am not a banker. When I transfer money abroad by means of a bank transfer I get a document with all these details. – Jonathan Rosenne Nov 26 '18 at 7:43
  • What if people use a decentralised stablecoin such as DAI? – Paul Razvan Berg Nov 26 '18 at 19:36
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That’s not how sanctions normally work. They’re generally based on countries rather than currencies.

The US can prevent businesses under US jurisdiction from trading with Russia, (any US business trading with a sanctioned country would be liable to prosecution), but it’s not for them to say that India cannot trade with Russia. If the two countries decide to trade, that’s within their gift. The currency used is largely irrelevant.

If the US wanted to block such a trade, they’d really be looking to get UN sanctions in place so that they’d then be agreed and enforced by every UN state (which would hopefully include at least one of the parties). If not, they could punish the country in question by pushing for other sanctions meaning they could trade with each other but not UN member states.

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