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Geopolitical Tensions and Financial Networks: Strategic Shifts Toward Alternatives

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  • Antonis Ballis

Abstract

Global financial systems are undergoing strategic shifts as geopolitical tensions reshape international trade and payments. The United States (US)-China trade war, sanctions regimes, and rising concerns over the weaponization of financial infrastructures like SWIFT have led countries to seek alternative networks, including China's CIPS and emerging cross-border CBDCs. This letter presents a dynamic theoretical framework where sanction risks, investment choices, and network effects drive payment system migration. Empirical evidence from Russia, Saudi Arabia, India, and Argentina supports the model. Policy implications point toward increasing financial fragmentation, with critical roles for international institutions to mitigate systemic risks. The future of finance may be less global and more regionally fragmented, influenced heavily by political considerations.

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  • Antonis Ballis, 2025. "Geopolitical Tensions and Financial Networks: Strategic Shifts Toward Alternatives," Papers 2505.21480, arXiv.org.
    • Handle: RePEc:arx:papers:2505.21480
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    References listed on IDEAS

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    1. Drott, Constantin & Goldbach, Stefan & Nitsch, Volker, 2024. "The effects of sanctions on Russian banks in TARGET2 transactions data," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 38-51.
    2. Hafner-Burton, Emilie M. & Haggard, Stephan & Lake, David A. & Victor, David G., 2017. "The Behavioral Revolution and International Relations," International Organization, Cambridge University Press, vol. 71(S1), pages 1-31, April.
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