“The economic sanctions imposed by the US on countries across the board, have put the dollar’s dominance at stake”, said US Treasury Secretary Janet Yellen. As the US continues to plaster sanctions willy-nilly, the targeted nations are seeking alternatives which puts the USD and its state in jeopardy.
“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 was quoted as saying by CNN.
“Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative,” she said before adding, “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.”
After casting aspersions over the health of the USD, Yellen added that sanctions were an ‘extremely important tool’ if used by the US and its allies as “a coalition of partners acting together”.
Yellen’s response comes days after the US Treasury and State Departments sanctioned nearly 120 targets, including Chinese, UAE and Turkish firms to squeeze Russia for its ongoing war with Ukraine.
Experts at the time suggested that sanctioning Turkish and UAE firms, which are US ally countries could have a negative effect.
Meanwhile, a miffed China released a statement calling USA’s action an ‘illegal’ move.
“It is a typical unilateral sanction and a form of ‘long-arm jurisdiction’ which seriously damages the legitimate rights and interests of enterprises and affects the security and stability of the global supply chain. China firmly opposes this,” read a statement released by the Chinese Commerce Ministry.
The USD has been the king of currencies since 1944 when it officially became the reserve currency of the world, Since then, the dollar has enjoyed a sort of domination that very few other currencies have experienced. Additionally, it has granted the US an insurmountable influence over other economies.
However, the de-dollarisation has started especially since the start of the Russia-Ukraine war. Nations across the board have started accessing if they can drop the USD and use other currencies to break the hegemony.
Last month, India inked an agreement with as many as 18 countries to trade in Indian rupees. More recently, New Delhi announced it had signed an agreement with Malaysia to start trading in INR.
Iran has also fully abandoned USD in its trade with China and Russia. Saudi Arabia, the centre of Islamic power and an OPEC member said it will abandon PetroDollar and accept PetroYuan.
Beijing is aggressively moving to present Yuan as an alternative to USD. It has been using global platforms such as the BRICS, SCO and OPEC to do its bidding. Russia is also increasingly using Yuan in international trade. It is also mulling launching a joint BRICS currency.
According to an IMF report, USD’s global foreign-exchange reserves fell below 59 per cent in the final quarter of last year. The trend is expected to continue this year and Yellen’s warning may suggest that the situation may have turned pear-shaped.