Economic sanctions imposed on Russia and other countries by the United States put the dollar’s dominance at risk as targeted nations seek out an alternative, Treasury Secretary Janet Yellen (photo) said on CNN.
Treasury Secretary Janet Yellen 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 said on CNN.
“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.”
The robust US capital markets and rule of law “are essential in a currency that is going to be used globally for transactions,” she added. “And we haven’t seen any other country that has the basic… institutional infrastructure that would enable its currency to serve the world like this.”
Yellen noted that sanctions are an “extremely important tool,” all the more so when used by the United States and its allies as “a coalition of partners acting together to impose these sanctions.” But she recognized how sanctions can hurt the US dollar.
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.