Abusing sanctions alienates allies, endangers U.S. financial hegemony

FOR IMMEDIATE RELEASE:
December 3, 2019
Contact: press@defensepriorities.org

WASHINGTON, DC—Ahead of the NATO summit in London, Belgium, Denmark, Finland, the Netherlands, Norway, and Sweden joined INSTEX, the Paris-based system created by France, Germany, and the U.K. to allow Europe to sidestep U.S. sanctions and do business with Iran. Defense Priorities Senior Fellow Enea Gjoza issued the following statement in response:

“The U.S. is a financial superpower, but that dominance is being eroded by the reckless overuse of sanctions, which incentivizes countries to establish alternative financial institutions outside America’s reach.

“INSTEX is not the first attempt to circumvent the U.S.-dominated financial system. In response to U.S. sanctions, Russia built an independent domestic payment system, North Korea turned to cryptocurrencies, and Iran traded oil for gold. But growing European support for INSTEX is most alarming, suggesting U.S. sanctions have become heavy-handed enough to alienate traditional allies with major economies.

“Foreign governments and companies aren’t bound to use the U.S.-led system—they do so because it’s the most attractive among existing alternatives. As the world becomes increasingly multi-polar, the U.S. must entice other nations to continue participating in our rules-based order. That hinges on establishing confidence the U.S. won’t abuse its privileged position to erode the sovereignty of other nations.

“U.S. secondary sanctions prevented European firms from doing business with Iran, but they also incentivized European governments to create commercial institutions resistant to U.S. pressure. Failure to moderate sanctions policies will accelerate the drift away from U.S.-led financial networks and erode the benefits the U.S. has enjoyed from financial hegemony, like the ability to sustain $1 trillion annual federal deficits.”