US Treasury Secretary Janet Yellen cautioned on Sunday that the continued use of economic sanctions on countries like Russia could potentially threaten the dominance of the dollar. Such measures may incite targeted nations to seek out alternatives, she suggested.
“When we apply financial sanctions tied to the role of the dollar, we risk gradually undermining the hegemony of the dollar,” Yellen revealed during a CNN interview. “Naturally, this stirs a desire among countries such as China, Russia, and Iran to explore alternatives. However, the dollar’s global use rests on aspects that aren’t easily replicated by other currencies.”
Yellen stressed the importance of the robust US capital markets and adherence to the rule of law, which she deemed crucial for a currency that’s used worldwide for transactions. “Thus far, we haven’t identified any other country with the necessary institutional infrastructure to enable its currency to serve the world in a similar capacity,” she added.
The Treasury Secretary underscored the significance of sanctions as an “extremely important tool”, particularly when deployed in coalition with the United States’ allies to enforce these measures.
Responding to a query about the potential use of frozen Russian assets for the reconstruction of Ukraine, post-Moscow’s invasion, Yellen asserted that “Russia should shoulder the cost for the damages incurred”. However, she also acknowledged the presence of “legal constraints on how we can handle frozen Russian assets, and we’re in discussions with our partners regarding future possibilities.”