Yellen Says Sanctions Risk US Dollar Hegemony

The treasury secretary recognized that sanctions make targeted countries look for an alternative to trading in the dollar

Treasury Secretary Janet Yellen on Sunday acknowledged that US economic sanctions risk the hegemony of the US dollar as the world’s reserve currency as they push targeted countries to seek alternatives.

“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 told CNN.

Countries targeted by US and other Western sanctions have naturally increased trade and cooperation, sometimes using alternatives to the dollar. For example, Iran and Venezuela began trading gas for gold under the Trump administration.

“Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative,” Yellen said. “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.”

While recognizing how sanctions can hurt the US dollar, Yellen said she still supported them using them against other countries, calling sanctions an “extremely important tool.”

History has shown that sanctions harm the civilian population of the targeted country while doing nothing to change the targeted government. Last month, Yellen recognized that US sanctions on Iran have caused a “real economic crisis” in the country but haven’t changed the government’s behavior. Despite this, she said the Biden administration plans to impose more sanctions on the Islamic Republic.