The secretary of the US Treasury, Janet Yellen, has admitted that Washington’s imposition of unilateral sanctions on countries around the world could weaken the dominance of the dollar.
“There is a risk, when we use financial sanctions that are linked to the role of the dollar, that, over time, it could undermine the hegemony of the dollar”, Yellen said in an April 16 interview with CNN.
She also noted that Washington’s use of economic warfare “does create a desire on the part of China, of Russia, of Iran to find an alternative” to the dollar.
Before serving as secretary of the Treasury, Yellen was the chair of the US central bank, the Federal Reserve.
Her remarks represent a significant public acknowledgment by a top level US government official that its increasing use of sanctions has fueled the growing de-dollarization movement in the Global South.
Republican Senator Marco Rubio made similar comments in a March 30 segment on Fox News, complaining, “We won’t have to talk sanctions in five years, because there will be so many countries transacting in currencies other than the dollar, that we won’t have the ability to sanction them”.
In the April 16 CNN interview, Fareed Zakaria asked Yellen:
The way that the United States has used sanctions often – in this case [against Russia], the case of the Iran nuclear deal – is to use the power of the dollar as the reserve currency of the world.
But that weaponization of the dollar has produced a reaction.
This week, President Lula in Brazil said, ‘Why are we all being forced to use the dollar?’
Emmanuel Macron made reference to the dollar in that same way.
The European Commission has talked about, after Trump pulled out of the Iran [nuclear deal], talked about creating an alternative to SWIFT, to the American-dominated payment system.
Is there a danger that we will look back at all these measures and say, this was the moment that the dollar’s hegemony and its status as a reserve currency began to falter?
Yellen leads the Treasury, whose Office of Foreign Assets Control (OFAC) oversees the US government’s sanctions.
There is a risk, when we use financial sanctions that are linked to the role of the dollar, that, over time, it could undermine the hegemony of the dollar, as you said.
But this is an extremely important tool, we try to use judiciously and in circumstances, especially when we have the support of our allies.
It’s not just the United States. It’s a coalition of partners acting together to impose these sanctions.
So it is a very effective tool.
Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative.
But the dollar is used as a global currency for reasons that are not easy for other countries to find an alternative with the same properties.
The US treasury market is the deepest, and most liquid, and safest asset. Dollars are widely used. We have very deep capital markets and rule of law that are essential in a currency that is going to be used globally for transactions.
And we haven’t seen any other country that has the basic infrastructure, institutional infrastructure, that would enable its currency to serve a role like this.
Despite Yellen’s claim that the US government uses this tool of economic warfare “judicially”, more than one-quarter of the global population lives in countries that have been sanctioned by Washington.
Unilateral sanctions that don’t have the approval of the United Nations Security Council, which is the vast majority of those imposed by the US, flagrantly violate international law.
Western sanctions have caused millions of deaths around the world.
A former United Nations assistant secretary-general and UN humanitarian coordinator in Iraq, Denis Halliday, resigned in 1998 in protest of the devastation that sanctions caused in the West Asian nation.
“United Nations Security Council member states … are maintaining a program of economic sanctions deliberately, knowingly killing thousands of Iraqis each month. And that definition fits genocide”, Halliday stated in 1999.
“We are now in there responsible for killing people, destroying their families, their children, allowing their older parents to die for lack of basic medicines”, he added. “We’re in there allowing children to die who were not born yet when Saddam Hussein made the mistake of invading Kuwait”.
The former top UN official estimated that sanctions caused between 1 million and 1.5 million Iraqis to die from malnutrition or lack of health care.
In a 1996 interview on 60 Minutes, former US Secretary of State Madeleine Albright was asked about a report that sanctions caused half a million children to die in Iraq. The top US diplomat replied, “I think this is a very hard choice, but the price, we think the price is worth it”.
Since then, Washington’s use of the sanctions weapon has massively increased.
Illegal US sanctions caused an estimated 40,000 deaths in Venezuela just from 2017 to 2018, according to a study by the Center for Economic and Policy Research.
The number of US government sanction designations grew from 912 to 9,421, skyrocketing by 933%, in the two decades from 2000 to 2021, according to economist Timothy Taylor’s review of OFAC data.
In the interview with CNN, Yellen argued that the unprecedented Western sanctions on Russia have been successful, causing a 40% drop in Moscow’s oil revenue and leading to a substantial government deficit.
She also implied that the US and Europe want to use some of the $300 billion worth of Russia’s foreign exchange reserves that they unilaterally seized in order to pay for reconstruction in Ukraine – in what is essentially an act of massive geopolitical robbery.
Zakaria asked if the money needed to rebuild Ukraine “should be taken from Russia’s frozen central bank reserves”.
Yellen hinted that Washington would like to do so, but there are “legal constraints”, stating:
I think Russia should pay for the damage that it has done to Ukraine. So that’s a responsibility that I think the global community expects Russia to bear.
This is something we’re discussing with our partners.
But, you know, there are legal constraints on what we can do.
We have frozen Russian assets, and we’re discussing with our partners what might lie in the future.
But I think that’s the right thing to happen, that Russia should pay for the damages that it’s caused.
The US dollar was established as the global reserve currency in the 1944 Bretton Woods Conference.
This same conference established the US-dominated World Bank and International Monetary Fund (IMF).
This April, the World Bank and IMF held their spring meetings in Washington.
While these US-dominated financial institutions were meeting, however, the developing nations in the BRICS system were strengthening their own alternative, the New Development Bank, which is adding new members, expanding its operations, and moving away from the US dollar.