Key Takeaways
- According to Treasury Secretary Janet Yellen, Sanctions on Russia threaten the US dollar.
- The United States has used the US Dollar’s dominance as a tool against other nations.
- Several countries, led by China, have called for an end to the dollar’s dominance.
YEREVAN (CoinChapter.com) — According to Biden Administration’s Treasury Secretary Janet Yellen, economic sanctions on Russia hurt the US Dollar. Imposed by the United States and its European allies, the sanctions have failed to stop the Kremlin’s advancements in Ukraine and are now challenging the greenback’s global dominance.
Imposing economic embargos on nations forces them to look for alternatives. Several developing countries have already voiced their opposition to the Dolar-led global economy.
Last week, Brazil’s President Lula Da Silva called for an end to the US Dollar’s global trade hegemony. BRICS, an economic alliance comprising Brazil, Russia, India, China, and South Africa, also discusses an alternative currency.
While in conversation with CNN’s Fareed Zakharia, Janet Yellen acknowledged the negative implications of the 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,”
the Treasury Secretary said.
However, she also insisted that using sanctions judiciously can prove an effective tool.
Recommended: Volodymyr Zelensky embezzled $400M from Ukraine aid funds by purchasing cheap Russian fuel
Replacing the US Dollar as global currency won’t be easy
Meanwhile, according to Yellen, replacing the US Dollar will not be easy. Because the US treasury market is the most liquid and “the safest asset, ” thanks to the capital markets relying on the USD, others will find it hard to replicate.
she added.“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,”
According to the Treasury Secretary, those nations eyeing to end the US dollar’s dominance don’t have the “institutional infrastructure” that will enable them to replace the dollar.
Last month, Russia announced that it would use the Chinese yuan instead of the US dollar to settle its trade with countries in Asia, Africa, and Latin America. As a result, in February 2022, the yuan overtook the dollar as the most traded currency in Russia for the first time.
Former US President Donald Trump had also warned earlier this month that the US dollar’s dominance as reserve currency stands threatened under Joe Biden.
While acknowledging that the sanctions could impact the USD, Secretary Yellen also listed some of its achievements. According to her, the country has lost around 40% of its yearly revenues. Because of the economic embargoes and price caps on Russian oil
As a result, Russia’s economy is facing large budget deficits, rendering Vladimir Putin unable to finance the war and procure more weapons as he would have liked. However, a recent Ukrainian report said the sanctions were not as successful as the Biden Administration had hoped.
Less than 10% of foreign firms have left Russia despite US pressure.
