American Currency Dominance at Risk As China, Russia and Iran Conspire To Dump Dollar: Treasury Secretary Janet Yellen

Treasury Secretary Janet Yellen says three of the largest players in international trade are conspiring to diminish the supremacy of the US dollar.

In a new CCN interview, Yellen says China, Russia and Iran are finding ways to move away from the dollar after witnessing how the United States used the world’s reserve currency to impose financial sanctions.

Yellen says that while the weaponization of the US dollar is a very effective tool in deterring bad behavior on the global stage, it could have the unintended consequence of countries coming together to circumvent the sanctions.

“So there is a risk when we use financial sanctions that are linked to the role of dollar, that over time it could undermine the hegemony of the dollar… But this is an extremely important tool we try to use judiciously and in circumstances, especially when we have the support of our allies.

It’s not just the United States. It’s a coalition of partners acting together to impose these sanctions. So it is a very effective tool. Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative.” 

Last year, Russia agreed to sell oil to China in exchange for yuan. In March, China broked a deal that saw the restoration of diplomatic ties between Iran and Saudi Arabia, two of the world’s largest oil producers.

Although Yellen says that the status of the US dollar as the world’s reserve currency could be threatened by the actions of some nations, she highlights that they will be hard-pressed to find an alternative that offers the same fundamental properties.

“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 US Treasury market is the deepest, most liquid and safest asset. Dollars are widely used.

We have very deep capital markets and rule of law that are essential in a currency that is going to be used globally for transactions, and we haven’t seen any other country that has these basic infrastructure and institutional infrastructure that would enable its currency to serve a world like this.”

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